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American and English 
Railroad Cases. 

A complete collection of all the railroad law as decided by the 
American, English and Canadian courts of last resort. 

Elaborate notes to the more important cases. As a means of giv- 
ing' the working lawyer a full collection of all the cases on the sub- 
jects treated, together with able and judicious criticism upon the 
points presented, they are simply invaluable. 



American and English 
Corporation Cases. 

This series presents a full collection of the cases in all the courts 
of last resort, both in America and England, on the law of private 
and municipal Corporations other than railroad companies. 

I, — SCOPE. Among' the topics treated of ■will he the following: 
Private Corporations. — Agency^ Assessmefits, Building Asso- 
ciations^ Dissolution of Corporations. Di-vidends and Earn- 
ings., Ecclesiastical and Religious Corporations^ Elections, 
Mandamus^ Officers., Organization^ Powers^ Stock and Stock- 
holders, Taxation. 

Municipal Corporations. — Assessments^ Bonds, Powers, Ordi- 
nances, Poor Laws, Streets, Taxes, Intoxicating Liquors, In- 
juries to Person and Property, etc., etc. 

2. — NOTES. The annotations are a special feature, being very full 
and exhaustive. 



These works are issued in monthly Parts, each Part containing 
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When Part 3 is published, the Parts are returned to the publisher 
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$4.50 per volume, including Notes of Cases. 

EDWHRD THOMPSON CO., Publisl^ers. 

Norttipoi^:, Ivong Island., Isl. Y. 



THE 



American and English 



ENCYCLOPEDIA 



OF 



LAW. 



COMPILED UNDER THE EDITORIAL SUPERVISION OF 

JOHN HOUSTON MERRILL, 

Late Editor oj the American and English Railroad Cases and the American and English 

Corporation Cases. 



VOLUME XVI. 




NORTHPORT, LONG ISLAND, N. Y.: 

EDWARD THOMPSON COMPANY, Law Publishers. 

1891. 




;;oPYRIGHT, IS9I, 

By EDWARD THOMPSON CO. 



MADE BY THE 
WERNER PRINTING & LITHO. 
AKRON, OHIO. 



PARTIAL LIST OF CONTRIBUTORS, VOL. XVL 



Mutual Insurance, 
Name, 

National Banks, 
Natio7ial Corporations, 
Navigable Waters, 
Navigation, . . 
Ne Exeat, . ... 
Negligence, 



Ne-w Trial, . . . 

Next of Kin, 

Nolle Prosequi, . . 

Nonsuit, . . 

Notary Public, . . 

Notice, 

Notice to Produce Papers, 
Novation, . ... 
Nuisance, . 
Nuncupative Wills, 
Oath, 



L. K. MiHiLLS, of the Akron (Ohio) 
Bar. 

M. L. Countryman, of the St. Paul 
(Minn.) Bar. 

Nathan Newmark, of the San Fran- 
cisco Bar. 

Henry T. Dechert, of the Philadelphia 
Bar. 

Charles S. Lobingier, of the Lincoln 
(Neb.) Bar. 

D. M. Mickey, of the Editorial StaflF Am. 
& Engl Encyc. of Law. 

Thomas J. Michie, ofthe Editorial Staff 
Am. & Eng. Encyc. of Law. 

William H. Russell, of the Chatta- 
nooga Bar, and H. Dent Minor, of 
the Editorial Staff Am. & Eng. Encyc. 
of Law. 

Isaac N. Payne, of the Detroit (Mich.) 
Bar. 

Albert B. Weimer, ofthe Philadelphia 
Bar. 

Henry F. STiTZELL,of the Philadelphia 
Bar. 

Thomas P. Howell, of the Editorial 
Staff Am. & Eng. Encyc. of Law. 

E. W. Metcalfe, of the Lincoln (Neb.) 
Bar. 

Elmer G. Sammis, of the New York 
Bar. 



Edmund A. Whitman, of the Boston 

Bar. 
M. L. Countryman, of the St. Paul 

Bar. 
Hamilton Douglas, of the Atlanta 

(Ga.) Bar. 
H. Dent Minor, of the Editorial Staff 

Am. & Eng. Encyc. of Law. 



TABLE OF TITLES AND DEFINITIONS. 



See index for numerous sub-titles and definitions contained in tlie notes. 



lyiDBDEK. See Homicide, i 

Must, I 

Mute, 2 

Mutilate, 2 

Mutilation, 2 

Mutinous, 3 

Mutiny, 3 

Mutual, 3 

MUTUAL ACCOUNTS, 4 

Mutual Assent, 15 

Mutual Combat, 15 

Mutual Consent, 15 

Mutual Credits, 15 

Mutual Dealings, 16 

Mutual Debts, 16 

Mutual Demands, 16 

MUTUAL INSURANCE, 16 

Mutuality of Contract, 108 

Mutual Mistake, 108 

Mutuant, 108 

Mutuary, 108 

Mutuum, 108 

My, 108 

My Son, in 

My Wife, in 

Mystery, in 

Mystic Will, in 

Naked, 112 

Naked Deposit, 112 

Naked Power, 112 

NAME, 112 

Named, 142 

Narcotics, 143 

Narr, 143 

Nation, 143 

NATIONAL BANKS, 143 

NATIONAL OOKPOEATIONS, 216 

NATIONAL GOVERNMENT, 219 

NATIONS, LAW OF, 219 

Nature, 219 

Natural, 219 

Natural Allegiance, 220 

Natural and Artificial Person, 220 

Natural Children, 220 

NATURAL GAS, 220 



NATURAL GAS COMPANIES, 222 

Natural Heirs, 223 

NATURALIZATION, 223 

Natural Law, 233 

Natural Love and Affection, 234 

Naturally, 235 

Naughty, 235 

NAVIGABLE WATERS, 236 

NAVIGATION, 270 

Navy Yard, 365 

Neap Tides, 365 

Near, 365 

Nearest, 365 

Neat Cattle, 367 

Necessaries, 367 

Necessarily, 368 

NECESSARY, 368 

Necessity, 373 

Need, 373 

NE EXEAT, 373 

Necklaces, 384 

Negative, 384 

Negative Easement, 384 

Neglect, 385 

NEGLIGENCE, 386 

Negotiable, 478 

Negotiating, 478 

Negotiation, 478 

NEGOTIABLE INSTRUMENTS, 479 

Negro, 484 

Neighborhood, 485 

Nephew, 485 

Niece, 483 

Nett, 487 

Ne Unques Executor, 489 

Neutral, 489 

Neutrality, 489 

Ne Varietur, 489 

New, 489 

New Promise, 490 

NEWSPAPERS, 490 

NEW TRIAL, 500 

Next, 700 

Next Friend, 702 

NEXT OF KIN, 703 



TABLE OF TITLES AND DEFINITIONS. 



Night, 707 

Night Walker, 708 

Nihil Est, 708 

Nisi, 709 

No, 709 

NOLLE PEOSEQUI, 709 

Nolo Contendere, 715 

Nominal, 715 

Nominate, 716 

Nominated, 716 

Nominee, 716 

Non-Access, 716 

Non-Arrival, 716 

Non-Claim, Statutes of, 716 

Non Est Inventus, 717 

Non-Prosequitur, 717 

NON-RESIDENT, 717 

NONSUIT, 720 

NON SUM INFOEMATUS, 750 

Nonuser, 750 

North, 750 

Northern, 750 

Northward, 750 

Noscitur a Sociis, 751 



Not, 751 

NOTAKY PUBLIC, 752 

Notes, 785 

NOTICE, 787 

NOTICE TO PEODUCE PAPEES, 843 

NOTICE TO QUIT, 860 

Notify, 861 

Notorious, 861 

Notwithstanding, 861 

Noxious, 861 

Nourishing, 861 

NOVATION, 862 

Now, 920 

Now Due, 921 

NUISANCES, 922 

Nul Disseisin, 1004 

Null, 1004 

Nulla Bona, 1004 

Nullity, 1004 

Nullum Tempus Occurrit Regi, 1005 

Number, 1005 

Nunc Pro Tunc, 1005 

NUNCUPATIVE WILLS, 1006 

OATH, 1017 



THE 

AMERICAN AND ENGLISH 

ENCYCLOPEDIA OF LAW. 



MURDER.— See HOMICIDE. 

MUST. — The Saxon word " must " is used in statute to place 
beyond doubt or cavil what is intended. It is more imperative 
than "shall" and has not yet been twisted by judicial construc- 
tion like the words "may" and "shall" into meaning something 
else.^ But the. word "must" has not always been construed so 
as to make it absolutely imperative.^ 



1. Eaton V. Alger, 57 Barb. (N. Y.) 
179-190. 

2. Sections 870 and 872 of the New 
York Civ. Code of Procedure provide 
that the examination of a party to an 
action may be taken at the instance of 
an adverse party at anj' time before trial, 
and specify what the affidavit to obtain 
an order for such an examination must 
contain. Held, that it is discretionary 
with the judge whether he grants the 
order to examine, although section 873 
provides that the party to whom such 
an order is granted must grant an order 
for the examination if the action is 
pending, etc., and that while it is 
said in section 873 that the judge 
■'must" grant the order where an affi- 
davit conforming to the previous sec- 
tion is presented to him, j'et we do not 
think .that the language is absolutely 
mandatory, and that it was intended to 
deprive the judge of all discretion, and 
that the affidavit is required to disclose 
the nature of the action and to set forth 
that the testimony of the party is ma- 
terial and necessary, and the judge must 

, be able to see, from the facts stated, that 
the testimony is material and necessary; 
that if, from the nature of the action 
and the other facts disclosed, he can see 
that the examination ia not necessary 

16 C. bf L.— I 1 



for the part}' seeking it, then it cannot 
be supposed that it was the legislative ■ 
intent that he should be obliged, never- 
theless, to make the order. Jenkins v. 
Putnam. 12 N. E. Rep. 613. 

Section 544 N. Y. Civ. Code of Proc. 
provides that "the court ... in a 
proper case 'must,' upon such terms 
as are just," permit a supplemental an- 
swer. Held, that the court has a dis- 
cretion to permit or to refuse a supple- 
mental pleading, but that discretion 
must be exercised reasonably, and not 
capriciously or wilfully. Spears v. 
Mayor etc. of New York, 72 N. Y. 
442. 

Section 1678, which is designed to 
provide for judicial sales, declares that 
if the property consists of two or more 
distinct buildings, farms or lots, they 
shall be sold separately, unless other- 
wise ordered by the court. Wallace v. 
Feeley, 61 How. (N. Y.) 225; affirmed 
88 N. Y. 646. It has been held that 
this section was directory; but subse- 
quently, and bj' chapter 682 of the laws 
of 1881, that section was amended by 
substituting the word " shall " for 
"must," and this would seem to be an 
indication on the part of the legislature 
to obviate the construction which has 
been placed on the word "must" by pro- 



Definition. MUTE—MUTILA TE—MUTILA TION. Definition. 



MUTE.i — See also WITNESS. 

MUTILATE— MUTILATION.— Mutilate means something less 
than total destruction. Mere mutilation of a will would not of 
itself take from a will all legal force. A mutilation, however, 
which takes from the instrument an element essential to its validity 



nouncing it to be directory merely in 
its effect. 

Section 2393, and wliicli is one of the 
sections relating to foreclosure by ad- 
vertisement, declares that "if the prop- 
erty consists of two or more distinct 
farms, tracts or lots, they must be sold 
separately," but has the further pro- 
vison, "and as many only of the dis- 
tinct farms, tracts or lots shall be sold 
as it is necessary to sell in order to sat- 
isfy the amount due at the time of the 
sale and the costs and expenses allowed 
by law." Although the word "must" is 
used in this section, and if its effect were 
to be construed in view of the decision 
to which reference has been made, it 
would be necessary to declare it direc- 
tory, such a conclusion would not be 
justified, taking the whole context of 
the section into consideration, and from 
which it is manifest that it was intended 
to be absolute and mandatory, as evi- 
denced by the prohibition of the sale 
. of any more of the farms, tracts or lots 
than necessary to satisfy the amount 
due at the time of the sale. The sec- 
tio'n may be said, with great propriety, 
tobenotonlymandator^'butprohibitory, 
its whole context considered together. 
Hemmer v. Hustace, 51 Hun (.N. Y.) 

457- 

In construing section 41, Rev. Stat. 
of Mrnn., p. 334, which provides that 
certain actions "must be tried in the 
county in which the parties, or one of 
them, resides at the commencement of 
the action . . . subject, however, 
to the power of the court to change the 
place of trial as provided in section 
forty-three" of the same statute, and 
that section provides, among other 
things, that "the court may change the 
place of trial on the application of all 
the defendants who answer," the 
court said: "The principal difficulty 
in construing these provisions of the 
statute arises out of the positive terms 
used in section 41, 'the action must be 
tried,' etc. In construing statutes, all 
the provisions relating to the same sub- 
ject must be considered together and 
with reference to each other, and also 
with reference to the effect which each 
provision was designed to secure. . . . 



The primary and controlling object to 
be secured by the provisions of the 
statute regulating the place of trial in 
transitory actions was, manifestly, to 
protect defendants against the oppres- 
sions which plaintiffs might otherwise 
maliciously or capriciously practice 
upon them through the general jurisdic- 
tion of the district courts. . '■ . Such 
being the design and purpose of the 
statute. Ought the word 'must' in sec- 
tion 41 to be construed as an absolute 
and inflexible mandate upon the court 
and the parties, so as to put the case, 
situated as this is, beyond the power of 
the court or the parties to proceed any 
further therein.? I cannot consent to 
such construction. It irretrievably de- 
stroys tMe power of the court to "try a 
cause of which it has a full and unques- 
tionable jurisdiction. No acts or agree- 
ment of the parties, however solemn or 
explicit, could, under such construction, 
confer upon the court the power to try 
a cause out of the proper county." 
Merrill v. Shaw, 5 Minn. 148. 

1. Under the old system if, the pris- 
oner stood mute it was deemed that no 
trial could be had. If a plea could not 
be extorted from him, and it was ascer- 
tained that he was not dumb ex visita- 
tioiie Dei, he was sentenced as on con- 
viction. But as the legal system de- 
developed, methods of procedure 
yielded in importance to substantial 
rights, and the courts were authorized to 
enter a plea of not guilty for the pris- 
oner who declined to plead, and to in- 
vestigate the question of his guilt upon 
this enforced plea. State v. Ward, 48 
Arkansas 36-39. 

Where a defendant stood mute it was 
contended for him that the court had no 
jurisdiction to try him, and had' no 
power to enter a plea of not guilty for 
him, or to proceed to trial as if he had 
pleaded not guilty. Held, that the 
court has power to tr^' a person who 
refuses to plead to an information or 
who wilfully stands mute when ar- 
raigned on it, without entering for him 
a plea of not guilty, and has a right to 
proceed in such trial as if there were a 
plea of not guilty, even though no 
statute of the United States specific- 



Definition. 



MUTINO US—MUTUA L. 



Definition. 



would have the effect to revoke it. Courts often speak of " rec- 
ords mutilated by erasures " and " records mutilated by corrupt 
interlineations."^ 

MUTINOUS — (See also Mutiny). — Mutinous is defined as 
"tending toward mutiny ; as mutinous conduct or words. "^ 

MUTINY — (See also REVOLT). — Mutiny is " insurrection 
against authority ; revolt against discipline ; resistance of officers, 
by sailors, soldiers or marines."'* 

MUTUAL. — The adjective " mutual " is defined as reciprocally 
acting or related ; reciprocally receiving ; reciprocally given and 
received ; reciprocal ; interchanged, as mutual love, assistance, 
advantage, aversion.* 



ally prescribed such mode of proced- 
ure in the case of an information. 
United States v. Borger, 19 Blatchf. 
429. 

^ 1. Woodfill V. Patton, 76 Ind. 575; 
s. c, 40 Am. Rep. 269, construing a 
statute' which provides that no will 
shall be revoked unless the testator 
shall destroy or "mutilate" the same. 
In this case the testator drew pencil lines 
across his signature to the will. Held, 
that the will was revoked, and that it 
was a mutilation of it under the statute. 

Mutilation and Spoliation. — See Al- 
teration OF Instruments, 1 Am. & 
Eng. Encyc. of Law 497. 

2. And. L. Diet, i Bl. Cora. 415. 
■ 3. And. L. Diet. 694. 

4. The California Civ. Code provides 
that "consent alone will not constitute 
a marriage; it must be followed by a 
solemnization or by a 'mutual' assump- 
tion of marital, rights, duties or obliga- 
tions." Where two persons made and 
signed a written contract of marriage 
and the wife also signed a written agree- 
ment not to make known the contents 
of the marriage contract for two years, 
unless the husband saw fit to do so; it 
also appeared that the parties to this 
contract cohabited together as husband 
and wife for more than a year, after 
which there was a disagreement be- 
tween them, and the wife brought an 
action to obtain a divorce, etc. In this 
action it was urged that, under the code, 
there can be no "mutual assumption" 
of marital rights and duties which is 
unknown to the community at large, or 
to the acquaintance of the parties; and 
that the word "mutual" requires "an 
open and respectful" recognition before 
the community in all their social inter- 
course, that they stand to each other in 



the relation of husband and wife. On 
this question the court said: "Where 
the holding out to the world the rela- 
tion is evidence of a prior contract such 
evidence does not necessarily depend 
for its effect upon amenity of manners 
or upon the degree to which the 
parties extend to each other the affec- 
tionate respect which should attend the 
intercourse of husband and wife in well- 
ordered households The statute does 
not make the validity of a marriage by 
consent depend upon the full perform- 
ance of their mutual duties; the failure 
to perform certain important obliga- 
tions is made ground for divorce. It may 
be conceded that the code requires the 
mutual assumption of such duties. The 
assumption of rights and duties must be 
'mutual,' and the code is given effect if 
they are assumed between and towards 
each other. . . When parties 

agree to a present marriage they mu- 
tually agree to take on themselves the 
obligations appertaining to the marriage 
state, but the code requires that, to jus- 
tify a finding of marriage, there shall be 
additional evidence that they have as- 
sumed marital rights or obligations. If 
a case be supposed where, immediately 
after consent to present marriage, the 
parties have permanently separated, 
there would perhaps be no marriage, not 
because they would have not mutually 
agreed to assume marital obligations, 
but because the section of the code re- 
quires evidence of other and subsequent 
facts showing the actual assumption ot 
marital obligations. In considering 
the evidence of such facts subsequently 
occurring, however, the direct evidence 
of previous consent is not to be rejected 
— all the evidence is to be taken together. 
As we have seen, cohabitation alone 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



MUTUAL ACCOUNTS— (See- also ACCOUNT, vol. I, p. io8; AC- 
COUNT Rendered, vol. i, p. 128 ; Limitation of Actions,, vol. 
13, p. 764; Merchants' Accounts, p. 311, supra). — Mutual 
accounts are such as contain mutual credits between the 
parties, or an existing credit on one side which constitutes 
a ground for credit on the other; or where there is an 
understanding that mutual debts shall be a set-off pro tanto 
between the parties.^ They are made up of matters of set-off. 
There' must be a mutual credit founded on a subsisting debt on 
the other side, or an express or an implied agreement for a set-off 
of mutual debts.^ 



does not prove marriage, because the 
relation between man and woman co- 
liabiting may not be that of husband 
and wife. But cohabitation, with evi- 
dence of a reputation ' that they were 
married, created by the conduct of the 
parties, proves a previoU's consent and 
marriage, So, under the code, cohabit- 
ation with direct evidence of previous 
consent, proves a marriage; because 
when viewed with the previous consent, 
cohabitation is evidence of a 'mutual 
assumption' of marital rights, duties or 
obligations." Sharon -y. Sharon, i6 Pac. 
Rep. 345. 

1. 2 Bouv. L. Diet. 265. 

2. Green v. Disbrow, 79 N. Y. i; s. 
c, 35 Am. Rep. 496; Angel on Limita- 
tions, 136; Norton v. Larco, 30 Cal. 127; 
s. c, 89 Am. Dec. 70; Lockwood v. 
Hanson, 16 Greg. 102; Adams v. Car- 
roll, 85 Pa. St. 209; Abbott v. Keith, 11 
Vt. 525; Hutchinson v. Pratt, 2 Vt. 149; 
Wood V. Barney, 2 Vt. 369; Becker v. 
Jones, 37 Hun (N. Y.) 35; Trueman v. 
Fenton, i Smith's Lead. Cas.,H. & W's 
■Notes 966; Hutchinson -u. Pratt. 2 Vt. 
149; Wood V. Barney, 2 Vt. 369; Becker 
t). Jones, 37 Hun (N. Y.) 35; Warren v. 
Sweeney, 4 Nev. 101; Peck v. New 
York etc. U. S. Mail S. S. Co., 5 Bosw. 
(N. Y.) 226; Abbott V. Keith, 11 Vt. 
525; Hodge V. Manley, 25 Vt. 210; 
Schall V. Eisner, 58 Ga. 190; Seitzinger 
V. Alspach (Pa.), 4 Atl. Rep. 203; 
Beaty -u. Bordwell, 91 Pa. St. 43'8; 
Mattern r. McDivitt, 113 Pa. St. 402; 
Penniman zi. Rotch, 3 Mete. (Mass.) 216; 
Green v. Caldcleugh, i Dev. & B. (N. 
Car.) L. 321; s. c, 28 Am. Dec. 567; 
Higgs V. Warner, 14 Ark. 192; Loeffel, 
V. Hoss, II Mo App. 133; Huebner v. 
Roosevelt, 6 Daly (N. Y.) 337; Kim- 
ball V. Kimball, '16 Mich. 2u; Thomp- 
son V'. Reed, 48 111. 118; Cuck xt. Quack- 
enbush, 13 Hun (N. Y.~) 107; Sawyer v. 
Lufkin, 58 Me. 429; Parker v. Schwartz, 



136 Mass. 30; Safford v. Barny, 121 
Mass. 300; Gordon v. Lewis, 2 "Sumn. 
143: Greene -u. Darling, 5 Mar. 201; 
Fox V. Fisk, 6 Hovv. (Miss.) 328, 346; 
Talcott V. Smith, 142 Mass. 542; Cham- 
ber V. Marks, 25 Pa. St. 296; Campbell 
V. White, 22 Mich. 178; Madden v. 
Blain, 66 Ga. 49; Sanders v. Sanders, 
48 Ind. 84, 86; Davis v. Smith. 4 Me. 
337; Cogswell V. DoUiver, 2 Mass. 217; 
s. c, 3 Am. Dec. 49; Smith v. Ruecas- 
tle, 7 N. J. L. 357; Coster v. Murray, 5 
Johns. (N. Y.) Ch. 522; Tucker i<. 
Ives, 6 Cow. (N. Y.) 193; Kimball v. 
Brown, 7 Wend. (N: Y.) 322, 325; 
Chamberlain v. Cuyler, 9 Wend. iN. 
Y.) 126; Sickles v. Mather, 20 Wend. 
(N. Y.). 72; s. c, 32 Am. Dec. 521; 
Chambers v. Marks, 25 Pa. St. 296; 
Fitch V. Hilleary, i Hill (S. Car.) 292; 
Wood V. Barney, 2 Vt. 369; Abbott v.. 
Keith, II Vt. 525; Hodge v. Manley, 25 
Vt. 210. 

When men deal with an express 
or implied agreement that what each 
sells or delivers shall, instead of giving 
rise to a demand payable at once, stand 
as a payment or set-off for what has 
been or may be received from the other, 
their liability will be limited to, and de- 
pend upon, the balance, as finally dis- 
closed, and the statute will not begin to 
run until the date of the last item." 
Green v. Disbrow, 79 N. Y. i; s. c, 35 
Am. Rep. 496. 

In ordinary cases of mutual dealings 
no obligation is created in regard to 
each particular item, but only for the 
balance, and it is the constantly varv- 
ing balance which is the debt. ' It has 
uniformly been held that distinct 
and different items of charge in an open 
and mutual account do not constitute 
separate claims; but that the claim or 
debt IS found in the balance of the ac- 
count, and that it is the balance only 
that constitutes the claim of the party 



Deflnition. 



MUTUAL ACCOUNTS. 



Befinition. 



to whom it is due. Abbott xk Keith, ri 
Vt. 525; Hodge V. Manley, 25 Vt. 210. 
It appears that it is unimportant, as 
to the particular mode of keeping such 
an account whether on books or loose 
scraps of paper, or without any written 
charges, or whether it is all kept in one 
shape or in different forms. Abbott v. 
Keith, II Vt. 525. 

, Upon the trial of an action brought 
to recover for goods sold and delivered, 
it appeared that all the goods except 
one item, costing one dollar, had been 
delivered more than six years prior to 
the commencement of the action.- It 
also appeared that more than six years 
prior to the commencement of the 
action the defendant had charged the 
plaintiff with one dollar and eighty 
cents, and within that period with two 
dollars for use of a wagon, and seventy 
cents for repairs on the same. He/d, 
that the evidence was sufficient to au- 
thorize the jur^' to find that a mutual 
account existed between the parties, 
and that the trial court erred in refusing 
to submit that question to them. And 
it was that because the action was 
brought for goods sold and delivered, it 
was not improperlj' brought that the 
plaintiff could properly allege their 
claim upon one side of the account as 
for goods sold, etc., and if the defend- 
ant failed to allege or prove his claim, 
the plaintiffs could protest theirs against 
the bar of the statute by proving one 
or more items of the account existing 
on the part of the defendant, and the 
_action will be deemed to have been 
brought for the balance within the 
meaning of the statute. Becker v. 
Jones, 37 Hun (N. Y.) 35. 

There are cases in which the prac- 
tical effect of their decisions are, that 
there can be no mutual accounts only 
between merchant and merchant con- 
cerning the trade of merchandise; or, 
in other words, that the statute of limit- 
ations does not admit of any exception 
being extended to any class of accounts 
excepting accounts concerning mer- 
chandise between merchant and mer- 
chant. Landsdale v. Brashear, 3 T. B. 
Mon. (Ky.) 330, 333; Dyott v. Letcher. 
6 J". J. Marsh. (Ky.) 541, 545; Smith v. 
\ Dawson, 10 B. Mon. (KyO 112, 114; 
Sprogle V. Allen, 38 Md. 331; Blair v. 
Drew, 6 N. H. 235; Livermore v. Rand, 
26 N. H. 85; Craighead v. Bank of 
Tennessee, 7 Yerg. (Tenn.) 399; Lowe 
V. Dowborn, 26 Tex. 507. 

South Carolina seems to follow a 
different rule from the rest of the States. 



There the rule is that where the demand 
of one party arises subsequent to the 
demands of the other it does not con- 
stitute a mutual account — that is, it is 
essential that the demands of the re- 
spective parties should arise together. 
Cunningham v. Guigner, Dud. (S. Car.) 
351. 

In New Hampshire a different rule is 
followed. In that State, items in mu- 
tual accounts, within six years next- 
before action brought, constitute of 
themselves no admission of an unset- 
tled account extending beyond six 
years, nor any evidence of a promise to 
pay a balance so as to take a case out 
of the statute of limitations. Gage x>. 
Dudley, 64 N. H. 271; Russell v. Copp, 
5 N. H. 154; Blair v. DreV, 6 N. H. 

It seems that in N'eiv Hampshire, the 
only exception made in regard to ac- 
counts by the statute of limitations, is 
the excepting of accounts "concerning 
the trade of merchandise between mer- 
chant and merchant, their factors and 
servants." Gage v. Dudley, 64 N. H. 
271. 

So that there is practically' no dis- 
tinction in MeTV Hampshire in regard 
to mutual accounts. They are put on 
to the same footing as any other ac- 
count, except as to accounts between 
merchant and merchant. And the doc- 
trine, in regard to all accounts, except 
as to accounts between merchant and 
merchant, concerning merchandise, is 
that an acknowledgment, in order to 
take a case out of the statute, must con- 
tain an unqualified admission of a pre- 
vious subsisting debt -which the party 
is liable and willing to pay. Gage i>. 
Dudlej-, 64 N. H. 271; Ventrisf. Shaw, 
14 N. H. 432; Douglass v. Elkins, 28 
N. H, 26; Manning v. Wheeler, 13 N. 
H. 487; Holt V. Gage, 60 N. H. 536; 
Blair v. Drew, 6 N. H. 235. For a fur- 
ther discussion of this question, see 
the article on Limitation of Ac- 
tions. 

In lo-va, the statute of limitations 
commences to run from the date of the 
last item, whether debit or credit, on a 
continuous open current account. 
Thorn v. Moore, 21 Iowa 285; Mills v, 
Davies, 42 Iowa 91 ; Keller v. Jackson, 
58 Iowa 629; Sec. 2531, Iowa Code. 
Hence the question of mutual accounts 
does not arise in the courts as a distinct 
feature from other accounts, for the 
reason that the rule applicable to the 
running of the statute as to mutual ac- 
counts is applied to all open current 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



It is not necessary that each party must have a cause of action 
against the other for his side of the account.^ 

An account of items upon one side and payments merely upon 
the other, is not a mutual account. The payments do not in 
such case enter into the account. They are at once applied and 
reduce the account.^ 



accounts so that the distinction made 
jn other States in regard to mutual 
dealings and reciprocal demands does 
not arise under the Iowa statute. 

Beclprocal demand is sjnonj'mous 
with mutual account. Green v. Dis- 
brow, 79 N Y. I ; s. c, 35 Am. Rep. 496, 
500. 

1. Green v. Disbrow, 79 N. Y. i; 35 
Am. Rep. 496. 

But there are decisiions that hold 
that "to constitute mutual accounts 
there must be mutual demands, each 
party must have a demand or right of 
action against the other." Adams v. 
Carroll, S5 Pa. St.-209; Ingram v. Sher- 
ard, 17 S. & R. Pa. 347; Lowber v. 
Smith, 7 Pa. St. 381; Warren v. Swee- 
ney, 4 Nev. I0I-; Peck v. New York etc. - 
U. S. Mail S. S. Co., 5 Bosw, (N. Y.) 
226. 

In Green v. Disbrow, Earl, J., in 
sustaining his point that the set-oft' need 
not necessarily be such a demand as 
would constitue a cause of action, criti- 
cises some of the cases holding adversely 
to him substantially as follows: "That 
in Lowber -v. Smith, the precise point 
then decided was, that an account is 
not rendered mutual by credits therein — 
payments, either in money or property. 
But the judge,. in deciding this case, used 
language not sanctioned by authority, 
and that the case had been criticised in 
I Smith Lead. Cas., H. & W's notes 
967; and in his opinion the reasoning of 
the judge who wrote the opinion is 
there shown to be clearly unsound. 
That the case of Adams v. Carroll was 
one when where all the items of the ac- 
count were upon one side and the 
credits for money on the other side; and 
that it was properly held not to be a 
mutual account, but that the improper 
language was here again used that, "to 
constitute mutual accounts, there must 
be mutual demands, each party must 
have a demand or right ' of action 
against the other." He then states 
that: "These Pennsylvania decisions 
were made utlder a statute, the language 
of which was like that in the statute of 
James I, and the dicta which I have 
quoted are not sanctioned by any Eng- 

6 



lish or American authority construing 
that statute. Similar language is usdd 
by Hoffman, J., in Peck v. New York 
etc. U. S. Mail S. S. Co., a case where 
all the items are upon one side, and 
simply money payments on the other." 
The learned judge, in further discuss- 
ing this question, in speaking in relation 
to the items of the account in the case 
he was deciding, says: "It is true that 
the defendant could not have sued the 
plaintiff for these items, but that was so 
simply because the plaintiif did not owe 
him anything. But suppose the de- 
fendant had in the same way delivered 
goods to the plaintift" until the balance 
was in his favor, would it then be de- 
nied that he could not have sued and 
recovered against the plaintiif? 'It has 
never been decided that, in order to 
make an account of mutual or recipro- 
cal demands, each party must have, as 
claimed by the learned counsel for the 
appellant, a cause of action against the 
other for his side of the account. 
There is but one cause of action in such, 
case, and that is for the balance; but 
were it not for the account on the op- 
posite side, each party would have a 
cause of action for the items of his 
account." 

Where the set-off on one side was a 
valid account for work and labor and 
on the other side it was one for board 
furnished in the mean time, held, to 
be a mutual account. Schall v. Eisner, 
58 Ga. igo. 

But one item of credit alone is suf- 
ficient to make the account mutual and 
to take it .out of the statutes. Green v. 
Disbrow, 7 Lans. (N. Y.) 381, 391; 
Penniman v. Rotch,3Met. (Mass.) 216; 
Kimball v. Brown, 7 Wend. (N. Y.) 
322; Norton v. Larco, 30 Cal. 127; s. c, 
89 Am. Dec. 70. 

2. Green v. Disbrow, 79 N. Y. i;. 35 
Am.Rep.496; Peck i;.N.Y.& Liverpool 
U. S. Mail S. S. Co., 5 Bosw. (N. Y.) 
226; Abbott V. Keith, 11 Vt. ■;2s- 
Hodge V. -Edmond, 25 Vt. 210; Mat- 
tern V. McDivit, 113 Pa. St. 402; Weath- 
erwax v. Cosumes, 17 Cal. 344; Adams 
T-. Patterson, 35 Cal. 122; Prenatt v. 
Runyan, 12 Ind. 174; Dyer v. Walker, 



Definition. 



MUTUAL ACCOUNTS. 



Definition, 



51 Me. 104; Parker v. Schwartz, 136 
Mass. 30; Webster v. B^'rnes, 32 Md. 
86; Abbey -v. Owens, 57 Miss. Sio; 
Warren x<. Sweney, 4 Nev. loi; Peck v. 
New York etc. Co., 5 Bosw. 226; Bodell 
V. Gib^son, 23 Hun 40; Green v. Disbrow, 
79 N. Y. i; 35 Am. Rep. 496; Green v. 
Caldcleugh, i Dev. & B. 320; Ingram v. 
Sheward, 17 Serg. & R. 347; Hay v. 
Kramer, 2 Watts & S. 137; Lowber v. 
Smith, 7 Pa. St. 381; Adams v. Carroll, 
85 Pa. St. 209; Guichard v. Sapervede,ii 
Tex. 522; Judd v. Sampson, 13 Tex. 19. 
This is especially true when the pay- 
ments are not general ones, but are 
intended on specific items of the ac- 
count. Penniman v. Rotch, 3 Met. 
(Mass.) 223; Peck v. New York etc. 
Co., s Bosw. (N. Y.) 226. 

Yet there is no doubt but what 
money may form a proper charge or 
" credit in a mutual account so as to 
save it from the operation of the stat- 
ute. Parker v. Schwartz, 136 Mass. 
30; Knipe v. Knipe, 2 Blackf. (Ind.) 
340;. Plimpton V. Gleason, r;7 Vt. 604. 

But where there is a due bill or ne- 
gotiable note that represents a loan of 
money on one side and the sale of 
goods on the other side of an account, 
the account is not within the exception 
of the statute in relation to mutual ac- 
counts. Clark V. Maguire, 35 Pa. St. 

259- 

A payment, whether it be of money 
or of any article of personal property of 
a stipulated value made on account, and 
intended by the parties to be applied as 
a payment and not as a set-oif fro 
tanto, will not make an account a mu- 
tual one. Norton z-. Larco, 30 Cal. 
127; s. c, 8g Am. Dec. 70. 

But where articles of personal prop- 
erty are delivered by a debtor to his 
creditor who has an account against 
him, it will not be presumed that they 
were delivered in payment, but they 
are considered as matters of set-oif, 
although the party making the entry as 
a credit affixes a value thereto. Green 
V. Disbrow, 79 N. Y. i; s. c, 35 Am. 
Rep. 496; Norton v. Larco, 30 Cal. 
127; s. c, 89 Am. Dec. 70. 

But in a case Avhere an action was 
brought for work that the plaintiff had 
performed for the defendiint, for which 
a charge was made of $2,300, and it 
was sought to bring in this claim with- 
in the saving of the statute by proof 
of the delivery by defendant to the 
plaintiff of a wagon within the pre- 
scribed statutory' limit, for which the 
defendant received a credit of $100, 



the plaintiff, in his testimony in regard 
to this item, said: "On this account the 
defendant has paid, and is to be credited 
with the following sums of money," 
and then mentioned, among other items, 
"one wagon, $100." The court held 
that there was no alternative but to 
treat this item as a payment of so much 
money paid on account, and that this 
payment did not make the account a 
mutual one, and that the plaintiff could 
not recover. This was so held upon 
the doctrine that there must be such a 
reciprocal demand that each party 
would have a right of action against 
the other. Warren v. Sweeney, 4 Nev. 
100. 

Note. — The statute of limitations of 
the State of Nevada, under which the 
case of Warren v. Sweeney, 4 Ne\'. 
100, was decided, is so worded that the 
court in the case of Wilcox v. Will- 
iams, 5 Nev. 206, held that part pay- 
ment is not sufficient as a new promise 
to take a case out of the operation of 
the statute. That is, the courts under 
that statute will not imply a new 
promise to pay a debt from the mere 
fact of payment, and this forces a 
debitor, in order to save his debt from 
the operation of the statute, to prove ' 
an actual new promise made by the 
creditor to pay the debt. This ex- 
plains the decision of the court in the 
case of Warner v. Sweeney, in which 
they hold that the wagon was delivered 
as a payment on account, and at the 
same time the effect of their decision 
was that the account or debt was not 
renewed by such payment, although 
the statute had not run as to this 
item. But the case of Warren v. 
Sweeney, 4 Nev. 100, and the case of 
Green v. Disbrow, 79 N. Y. i, are in 
direct opposition to each other on the 
question as to whether the delivery of 
goods from a debitor to his creditor is 
to be considered as a payment, or 
whether it is to be considered as a 
credit, or, in other words, a demand 
against the final creditor to which the 
final debitor is entitled to have it set off 
against the demand of his creditor. In 
both of these cases the creditor had, be- 
sides making some money payments, 
delivered articles of merchandise, or, in 
other words, personal property' to the 
debitor to be applied upon the account. 
In Green v. Disbrow, the court held 
that the delivery of the butter and eggs 
was not payment, but that they were 
to be considered as matters of set-off. 
This view of the case made mutual de- 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



mands between the parties, and hence a 
mutual account, and saved it from the 
operation of the statute as well as from 
the line of decisions that hold that 
charges on one side and merely pay- 
ments on the other do not constitute 
mutual demands, and hence they are 
not mutual accounts. In Warren v. 
Sweeney the court held that the de- 
liver)' of the wagon was to be consid- 
ered as a payment on account. This 
view of the case made it an account 
with the charges all on one side and 
merely payments on the other, hence it 
was not a mutual account, and, accord- 
ing to the Nevada statute, the debit side 
of the account was barred by lapse of 
time, and the creditor had no claim 
against the debitor because it was held 
to be a payment and not a demand or 
set-off. On this point it seems that 
these cases cannot be harmonized. It 
is a direct difference of opinion between 
these courts. It must be understood 
that the discussion of the question in 
relation to mutual accounts as to 
whether the delivery of an article by » 
creditor to a debitor to be applied on 
the account, is to be applied as a set- 
off or as a payment, does not affect 
the question that a payment (excepting 
in Nevada) will usually renew an ac- 
count, provided that .the statute has not 
run against it. This principle of law 
applies to mutual accounts as well as 
anj' other class of accounts, and it 
makes no difference whether such a 
delivery of' goods is considered as a 
payment or a credit only (except in 
Nevada). Unless the creditor delivers 
it expressly for the purpose of having it 
applied on some particular item of the 
account it will have the effect, from the 
operation of the statute, of renewing the 
whole account as the law would im- 
ply, from either a new promise to 
pay the whole. (For a full treatment 
of this question see the article on Nevs^ 
Promise.) Where this is the case the 
question as to whether an account is a 
mutual or some other kind of an ac- 
count, as a rule, is not material, and is 
usually of no importance whatever. 
But it is of great importance as to 
whether the delivery of goods is con- 
sidered as a payment on an account 
or whether they are considered as a 
set-off, making a demand only in favor 
of the final creditor against the final 
debitor, as it was in the case of Green v. 
Disbrow, where the statute had run 
against all of the credit items of the 
account (as kept b}' the plaintiff), and 



also against the debit side of the ac 
count excepting one item. There was 
no claim made that the items of butter 
and eggs delivered by the defendant re- 
newed the account, for they were 
barred by the statute if considered 
alone. The importance attached to these 
items was as to whether they made the 
account a mutual one. If so, it was 
saved from the operation of the stat- 
ute, and if not, it was all barred by it 
except the last charge. And as to 
whether it was a mutual account or 
not depended how these items were ap- 
plied on the account. If they were 
held to be a payment on account, then 
the accovmt was not a mutual one, be- 
cause there would be only charges on 
one side and payments on the other. 
But if they were held (as the case was 
decided) to be only credits in the na- 
ture of a set-off, then there were mu- 
tual demands or reciprocal demands on 
both sides of the account, and it was a 
mutual one. Had the Nevada case 
(Warren v. Sweeney) arisen under the 
New York statute the question as to 
whether the wagon was applied on the 
account as a payment or as a set-off 
would have been of no importance, for 
in either case it would have taken the 
account out of the operation of the 
statute. It has been formerly stated in 
this note that when the delivery of 
goods by a creditor to. the debitor was 
such that the law would imply from it 
a new promise to pay the whole that 
"the question as to whether an account 
is a mutual or some other kind of an 
account is, as a rule, not material, and 
' is usually of no importance whatever." 
Technically this might be stated in 
more positive terms, viz, "that it is 
always the rule and of no Importance 
whatever," as it is always the rije 
where there is an account — that is, 
when there is no dispute but that there 
is an account between the- parties. But 
there is a class of cases where this is 
disputed, among which the following 
cases appear: Eldridge v. Smith, 144 
Mass. 35; Helms v. Otis, 5 Lans. (N^ 
Y.) 137; Talbott V. Todd, 5 Dana 
(Ky.) 190; Loeffel v. Hoss, 11 Mo. 
A-PP- 133; Belles -v. Belles, 12 N. J. L. 
339; Huebner v. Roosevelt, 6 Daly 
(N. Y.) 337; Leitzinger v. Alspach 
(Pa.), 4 Atl. Rep. 203; Gilmore v. Reed, 
76 Pa. St. 462. In these cases, when 
the parties first began their deal, it was 
entirely a one-sided affair; that is, the 
items were all. or nearly all, upon one 
side of the account, and if there was a 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



few on the other side thev were all 
cash items. But this state of affairs, 
after a time, seems to be entirely re- 
versed, and for a long time the items 
appear upon the other side of the ac- 
count, so that the statute has run 
against all of the items of the first 
part of the account and some of the 
latter part. Now, if the person who 
has furnished the goods for the latter 
part of the account brings suit against 
the person who furnished the goods 
that formed the items of the former 
part of the account, then the defendant 
in this case would set up his side of the 
account as ^ set-off, claiming that their 
dealing formed a mutual account, while 
the plaintiff would plead the statute as 
a bar to the set-off, and would claim 
that their dealings were not mutual but 
tWvy separate sets of transactions; and 
if the one in whose favor the first 
part of the account was the one that 
brought the action, rel^'ing on the ac- 
count as a mutual one, then the defend- 
ant would plead the statute of limita- 
tions as a bar to the plaintiff's part of 
the account, and claim on the part of 
the account not barred as a balance in 
his favor. In this class of cases it will 
be seen that the question as to whether 
the account is or is not a mutual one is 
quite important, but the main question 
is whether it is an account at all. That 
is, whether these two periods of deal- 
ings between the parties are to be 
kept entirely separate, and are en- 
tirely distinct transactions, or whether 
they are to be put together so ' as to 
form one account. If so, they are mu- 
tual; and whether they are to be treated 
as forming one account, or are to be 
kept separate, is a question in each and 
every case for the courts to determine 
from all the evidence and circumstances 
in the case, and from all the conditions 
and relations that the parties have 
borne to each other. From tliese facts 
it must be determined whether or not 
the parties expressly or by implication 
treated the dealings between them as 
one whole transaction or as several 
separate and distinct transactions. 

An action was brought by a mer- 
chant against a farmer to recover a 
balance due the merchant on account. 
It appeared from the evidence that the 
account had reached back over a great 
many years, and that the farmer had 
obtained goods and groceries from the 
merchant, and that among a number of 
cash credits the farmer had furnished 
the merchant with butter and eggs. 



amounting in all to about $12. And it 
also appeared that more than six years 
had elapsed since the last item of credit 
had been made on the account, but that 
a small debit item for goods appeared 
on the account that had been purchased 
by the farmer, and this item was with- 
in the statutorj' limit of six years from 
the time the action was brought. The 
farmer, in his answer, plead the statute 
of limitations to the most of the ac- 
account, claiming that the butter and 
eggS' were applied as payment on the 
count, and hence it was not a mutual 
account within the meaning of the stat- 
ute, and that this last debit item would 
not draw the rest of the account out 
from the operation of the statute. While 
the merchant claimed that the butter 
and eggs were merely credited upon the 
account as an off-set, and were not re- 
ceived as a payment, the evidence did 
pot show that there was any special 
agreement between the parties as to the 
application of these articles on the ac- 
count, but that they were usually sent 
by his son and his wife under the far- 
mer's direction, that they be applied on 
the account. Held, that it could not 
be presumed that the butter and eggs 
were delivered in payment; and that 
before they can be held to have been 
so delivered there must be proof that it 
was so intended, and that both parties 
so understood it; that they were taken 
to the plaintiff by the defendant's di- 
rection, and that the plaintiff received 
them without any particular direction 
or agreement with the defendant and 
credited them on his account; that in 
legal effect they were sold to the plain- 
tiff, the price of them to be credited on 
the account. And Earl, J., in deliver- 
ing the opinion of the court in this case, 
further says: "Suppose none of the 
plaintiff's accounts had been barred by 
the statute, and he had sued the defend- 
ant to recover the whole of it, ignoring 
the credits, can it be doubted that upon 
the facts disclosed in the evidence he 
could not have interposed his account 
for the butter and eggs as a set-off.? To 
hold otherwise and sustain the conten- 
tion of the defendant would be to sub- 
stantially nullify' the statute of limita- 
tions in actions brought to recover upon 
accounts, as such accounts generally 
arise and exist under circumstances 
similar to those which appear here. 
That is, goods are delivered upon the 
one side to off-set, or to be credited 
upon goods delivered upon the other 
side, the account being permitted to run 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



for mutual convenience, and the bal- 
ance to be paid by the part^' against 
whom, upon final adjustment, it shall 
be found to exist. Green v, Disbrow, 
79 N. y. i; s. c, 35 Am. Rep. 496. 

It appeared in an action that for 
years one Down was entitled to rent 
from one Jenkinson upon a leasing of 
certain premises owned by Down to 
Jenkinson, in which he kept a hotel, 
and that during the whole period 
Down was contracting debts with 
Jenkinson, among which were charges 
for the board of Down and his family, 
and to the payment of whfch the rent 
was applicable. There never was any 
settlement between the parties, Down 
having died and a receiver was ap- 
pointed to take charge of his estate 
pending the admitting of his will to pro- 
bate. Soon after his death Jenkinson 
made an assignment for the benefit of 
his creditors, and shortly thereafter died. 
The action was brought by the as- 
signee of Jenkinson against the re- 
ceiver of Down to recover a balance 
on the account, and the question for 
the court was whether there was an 
account between the parties. The de- 
fendants plead the statute of- limita- 
tions, and claimed a balance due them 
from Jenkinson's estate for rent. As to 
the question of the statute of limita- 
tions the court held that the demands 
were not subject to the operation of the 
statute, and in the opinion in the case 
the court says: "The credit of the rent 
by Jenkinson from year to year was 
evidently in ' pursuance of an agree- 
ment between him and Down that the 
rent should be an off-set against Jenk- 
inson's claims against Down, and 
Down appears to have acquiesced in 
such credit. The crediting of it, there- 
fore, must be regarded as an annual 
payment on account, to be applied if, 
and so far as necessary', to the payment 
of Jenkinson's demands. Here were 
mutual accounts, mutual credits founded 
on subsisting debts on the other side, 
and an implied agreement at least for a 
set-off of such mutual debts. Woolley 
V. Osborne, 39 N. J. Eq. 55. 

In Gold V. Whitcomb, 14 Pick. 
(Mass.) iSS, the court held that a shop- 
keeper's account containing charges for 
articles sold to the defendant in which 
it appeared that some of them were 
sold within six years before the action 
was brought, and also containing cred- 
its given more than six years before the 
action was brought; that this was not 
a mutual account so as that the charges 



within six years would draw the previ- 
ous charges out of the operations of 
the statute of limitations. This is the 
statement of the decision in the head 
notej and there is no opinion of the 
court reported. And in Green v. Dis- 
brow, 79 N.Y. i; s. c, 35 Am. Rep. 496, 
Earl, J,, in referring to this case, says: 
"The case is but briefly reported with- 
out any opinion of the court. It does 
not appear what the items of credits 
were. They must have been payments 
of money. If not, the case is opposed 
to the undoubted law." This case is 
also criticised by Shaw, C. J., in Pen- 
niman v. Rotch, 3 Mete. (Mass.) 217, as 
follows: "We are aware this decision is 
apparently opposed to Gould v. Whit- 
comb, 14 Pick. (Mass.) 188. In that 
case the plaintiff relied on a book ac- 
count, of which part of the charges 
were over and part within six years; 
there were credits, but none within six 
years; and it was held that all the 
items which had stood more than six 
3'ears before action brought were 
barred by the statute of limitations. 
But this decision proceeded on the old 
statute in which there was no provision 
similar to the revised statutes on which 
this depends. It was an implied excep- 
tion to the words of the statute, and 
was founded on this principle, that 
when the plaintiff sues on account 
which is, in whole or in part, of more 
than six years' standing, if he can show 
that the defendant has made payments 
of money or advanced' goods, labor or 
other value 'on that account,' it is an 
acknowledgment of the existence of 
the account, and raises an implied 
promise to pay the balance; or, in 
the language commonly applied to it, 
draws after it the whole account. 
But, of course, regarding such pay- 
ment as an acknowledgment, it must 
be deemed an acknowledgment, an 
implied promise made at the tijne 
of such payment or advanced by 
the defendant; and, therefore, if that 
payment had been more than six 
years before action brought, it was no 
evidence of a promise within six j'ears, 
and, of course, would avoid the opera- 
tion of the statute. In the case cited, 
there being no credit within six years, 
there was no new promise to avoid the 
statute upon the principle of an open 
and mutual account, and therefore ■ the 
statute was held to be a good bar to all 
debts of more than six years' standing 
when the action was brought. But w< 
think the revised statutes have intro- 



10 



Sefinition. 



MUTUAL ACCOUNTS. 



Befinition. 



extinguishment of the 



Mutual indebtedness does not work an 
respective debts without an appHcation of them to each other by 
the concurrent act of the parties.^ 



duced a new rule upon this subject 
somewhat more plain, exact and prac- 
tical than the former statute; and by it 
the whole of an open and mutual ac- 
count is taken out of the operation of 
the statute, if any transaction on either 
side can be proved to have been within 
six years next before the action brought. 
It follows, of course, that if there be 
no item upon either side within six 
years, the action is barred by the gen- 
eral limitation. 

Where the items in the account are 
all charges against one party and in 
favor of the other, it is not a mutual 
account. It lacks the very essential 
element to make it such — mutuality. 
Such an account does not show a sys- 
tem of mutual dealings and of re- 
ciprocal demands between the parties. 
Such a case does not come within the 
rule that items ^ within the prescribed 
statutory limit draw after them other 
items beyond that period. Fitzpatrick 
■u. Phelan, 58 Wis. 250; Butler v. Kirb3', 
i;3 Wis. 188; Cuck v. Quackenbush, 13 
Hun (N. Y.) 107. 

A mutual account may include 
charges for goods sold, services ren- 
dered, money advanced, as in way of 
trade or business, for these all enter in- 
to the accounts of business men as parts 
of their business, trade or merchandis- 
ing. But they will not include matters 
out of the trade or profession of either 
party, as money lent on bond or mort- 
gage or due on the purchase of real es- 
tatCi unless the debtor by some act of 
his adopted them as a part of such an 
account. Green v. Ames, 14 N. Y. 
225. 

But if there is any hiatus in a mutual 
account that exceeds the statutor3- 
period, the items beyond it are not 
saved, because the account is not con- 
sidered an open account after that. 
Chamberlin v. Cuyler, 9' Wend. (N. 
Y.) 126; Abbey v. Owens, 57 Miss. 810; 
Hibler v. Johnson, 18 N. J. L. 266; 
Booth V. Stockton, i Harr. (Del.) 51. 

Where the defendant advanced 
money for the purchase of stock, kept 
it in his possession, was to charge in- 
terest on the money advanced, and, 
when finally disposed of, he was to ac- 
count to the plaintiff for half of the 
profits, or charge him with like propor- 

il 



tion of the loss — held, not to be a mu- 
tual account; that it was an account on 
one side only, growing out of a special 
contract. Atwater v. Fowler, : Edw. 
(N. Y.) Ch. 417. 

Where the defendants, in an action, 
had accepted drafts for the plaintifts' 
accommodation only, and which the 
plaintiffs' were bound to pay, and these 
acceptances had been entered to the 
plaintiffs debit, so that the counter 
charge was necessary to balance the 
account; it also appearing that this 
was done for convenience merel3% and 
that the accommodation drafts fiad no 
connection with defendant's other deal- 
ings with the plaintiffs, and that these 
two last items were the only items 
within the statutory period, the rest of 
the entries being all barred by lapse of 
time — held, that the payment of these 
drafts by the plaintiffs was merely a 
payment of their own debt and did not 
create any debt from the defendants, 
and that these charges on either side 
were a mere memorandum and not an 
item of legal debt or credit, and did not 
result in the creation of an obligation 
on either part}' to pay anything to the 
other. Hence it was not such a trans- 
action as would bring the case within 
the exception of mutual accounts. 
Stickney v. Eaton, 4 Allen (Mass.) 
loS. 

Where the parties to a mutual ac- 
count stipulate for a time of closing it, 
either expressly or hy implication, 
the statutes of limitation will run on 
the balance from that time. But in the 
absence of an^' such agreement, the 
cause of action accrues from the date of 
the last item. Higgs v. Warner, 14 
Ark. 192. 

1. Carmalt v. Post, 8 Watts (Pa.) 
406; Beat}' V. Bordwell, 91 Pa. St. 
438. This expression is again used by 
the court in Mattern v. McDivitt, 
113 Pa. St. 402, viz: "Mutual demands 
or debts do not extinguish each other; 
nor does either prevent the statute run- 
ning against the other, unless both are 
such accounts as to bring the case 
within the exception." In the former 
case the plaintiff below brought suit to 
recover $461.70 from the testator of the 
defendant below for work done and 
material furnished defendant's testator. 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



The defendant pleaded setoflf,and sought 
to charge the plaintiff for the use and 
occupation of certain real estate of his 
testator. It appeared that, from the 
time that a right of action accrued 
upon this item for use and occupation 
until it was pleaded as a setoff, the stat- 
ute of limitations had become a bar to 
its recovery, unless the furnishing of 
materials and labor by the plaintiff, 
which was of a more recent date, made 
a mutual account, between the parties. 
The court held that there was nothing 
in 'the facts of the case to prevent the 
running of the statute as against this 
claim for use and occupation, and, in 
rendering the opinion, used the expres- 
sion referred to. In the latter case the 
plaintiff below brought an action to re- 
cover for goods sold and delivered to 
the defendant by his testator. The de- 
fendant below pleaded the statute of 
limitations to the larger portion of the 
account, and to the balance claimed a 
setoff for professional services rendered 
(he being an attorney at law) to this 
amount, and also claimed a balance in 
his favor. The plaintiff below claimed 
that this was a mutual account, and that 
the statute had not run as to any portion 
of his testator's account. Upon these 
facts the court held that this was not a 
mutual account, and after giving several 
definitions of a mutual account draws 
the following conclusion, viz: "As de- 
fined the account (mutual account) on 
each side relates to trades in merchan- 
dise. This may" include labor or any 
thing that is provable by book of origi- 
nal entry. Such account on one side 
is' not enough. A demand on the 
other side founded on anything else 
than such accounts as concern the 
trade of merchandise is not suflScient 
to bring the account of the other within 
the exception;" and then, in further dis- 
cussion of this question, uses the ex- 
pression referred to above The onh' 
meaning that can be taken from these 
expressions is, that mutual indebtedness 
is not sufficient of itself, without any 
agreement or understanding between 
the parties to apply them to each other, 
to bring a case within the exception of 
the statute, unless it is a mutual ac- 
count fer se. For the court, in the 
case of Seitzinger v. Alspach, sa^-s: 
"It is true, the mutual accoimts need 
not necessarily be between merchants. 
Other persons jnay so deal together if 
there be reciprocal accounts between 
them as in like manner to take them 
out of the statute." And in Mattern v. 



McDivitt, the court says: "Nor does 
either (mutual demands or debts) pre- 
vent the running of the statute against 
the other, unless both are such accounts 
as bring the case within the exception." 
This question as to when mutual 
debts between two parties constitute a 
mutual account, is more clearly stated 
by the court in the case of Eldridge v. 
Smith, 144 Mass. 35, in which the facts 
appear as follows: The plaintiff sued as 
the surviving partner of a late firm, on 
an account most of which was for the 
hire and keeping of horses. The first 
item charged being in November, 1854, 
and the last one, in December, 1S72. 
The defendant in his answer set up the 
statute of limitations to this account, 
and also filed an account in setoff for 
medical services and medicines fur- 
nished the plaintiff from February, 
1874. to May, 1S83. The plaintiff 's part- 
ner died in 1872; the suit was brought 
December 28th, 1S84. It will be seen 
that; unless the plaintiff could bring his 
case within the exception of the statute 
in regard to mutual accounts, that his 
whole claim was entirely' barred by the 
statute before he brought suit. The 
court held that this was not a mutual 
account, and in deciding this question 
referred to Penniman v. Rotch, 3 Met. 
(Mass.) 216, and Sofford f. Barney, 121 
Mass. 300, as enunciating the correct 
rule as to this class of cases, and then 
says: "Both of these cases make one of 
the elements of a mutual and open ac- 
count to be that there must be a mutual 
agreement, express or implied; that the 
items of the Account on the one side and 
the other are to be set against each 
other. In other words, there must be one 
account upon which the items on either 
side belong, and upon which they oper- 
ate to extinguish each other pro tanto 
so that the balance on either side is the 
debt between the parties. It is quite 
clear that the right to set off independ- 
ent debts under our statute is not suf- 
ficient to create a mutual open account. 
For instance, in this suit upon the 
plaintiff's account, the defendant might 
have a right to set off a promissory note 
of the plaintiff's, which the defendant 
holds as endorsee from the payee. But 
it cannot for a moment be contended 
that this would make the plaintiff's a 
mutual and open account. It is not 
enough that there should be mutual 
debts, but they must, by agreement of 
the parties, be parts of one account, 
upon which they would apply to and 
satisfy each other pro tanto." 
12 



Defluition. 



MUTUAL ACCOUNTS. 



Definition. 



On this question in the case of Green 
V. Caldcleugh, i Der. & B. (N. Car.) L. 
321 ; 28 Am. Dec. 567, Daniel, J., after 
stating the rule as to the statute of lim- 
itations concerning mutual accounts, 
and citing some authorities on that 
point, says: "But it seems to us that the 
true principle to be extracted from 
these decisions, applies only in those 
cases where these items are clearly 
parts of one continuing mutual account, 
which by the assent of the parties are 
to be charged therein, whenever the 
same shall be adjusted. This assent 
may be shown by directevidence of an 
agreement to that effect. It may be in- 
ferred also when each party keeps a run- 
ning account of the debits and credits 
of the account; or where one only, with 
the knowledge and concurrence of the 
other, is coniided to keep the account of 
all the mutual dealings. In these cases 
the new items are evidence affirming 
the continuance of an unsettled account 
at that time and warranting the fair 
presumption of a promise to settle it, 
and to pay the balance which may be 
ascertained on settlement. The whole 
of the reciprocal demands compre- 
hended in such running accounts are 
thereby taken out of the statute; the 
account is not to be split; but what shall 
be found upon all the items to be the 
balance is the true debit between the 
parties. That the mere fact of the ex- 
istence of disconnected and opposing 
demands between two parties, one of 
which demands is of recent date, shall 
take the case out of the operation of 
the statute, shall be evidence of a 
promise to pay that other, or to allow 
it in a settlement, is, in our opinion, not 
an inference of law or of reason, 
although some adjudications and several 
loose dicta appear to sanction it." S. 
P. Higgs V. Warner, 14 Ark. 192; Loef- 
fel V. Hoss, II Mo. App. 133; Huebner 
■V. Roosevelt, 6 Daly (N. Y.) 337; Kim- 
ball V. Kimball, 16 Mich. 211; Thomp- 
son V. Reed, 48 111. 118; Cuck v. Quack- 
enbush, 13 Hun (N. Y.) 107; Sawyer 
V. Lufkin, 58 Me. 429; Parker v. 
Schwartz, 136 Mass. 30; Saiford f. Bar- 
ney, 121 Mass. 300; Gordon v. Lewis, 2 
Sumn. (U. S.) 143; Greene v. Darling, 
1; Mass. (U. S.) 201; Fox v. Fisk, 6 
How. (Miss.) 328, 346; Talcott v. Smith, 
142 Mass. 542; Cliamber v. Marks, 25 
Pa. St. 296. 

Where the only credit items on an ac- 
count that was sought to be brought 
within the exceptions of mutual ac- 
counts were items of money and other 



articles of merchandise, marked, "re- 
turned," held that these items were 
not sufficient to bring the case within 
the exception in relation to mutual ac- 
counts. Campbell v. White, 22 Mich. 
178; 25 Mich. 462. 

Where the transactions are remote 
and there is nothing in their own nature 
or the evidence in a case to connect them, 
there can be no propriety in extending 
the exception of the statute to embrace 
them. Belles v. Belles, 12 N. J. L. 339. 

Where money is paid as a loan with 
an understanding between the parties 
that they are to be a part of their mutual 
dealing, and are to affect the general 
balance due thereon, it is sufficient to 
operate as a removal of the statute bar. 
Plimpton V. Gleason, 57 Vt. 604. 

The mutuality of the reciprocal de- 
mands must be established to bring an 
account within the statute. , Reciprocal 
demands which are not the proper sub- 
ject of an unliquidated account will not 
answer the purpose. Becker t. Jones, 
37 Hun (N. Y.) 35; Cuck v. Quacken- 
bush, 13 Hun (N. Y.) 107; Edmonstone 
V. Thomson, 15 Wend. (N. Y.) 554; 
Coster V. Murray, 5 Johns. (N. Y.) Ch. 
522; Hallock v. Losee, 1 Sandf. (N. Y.) 
220; Green v. Ames, 14 N. Y. 225; 
Huebner v. Roosevelt, 6 Daly (N. Y.) 
337; Campbell v. White, 22 Mich. 178; 
25 Mich. 462; Thompson v. Reed, 48 
111. 118. 

Mutuality of Parties. — The mutual 
accounts and dealings which will save 
a balance on either side from the bar of 
the statute of limitations must be those 
between the accounting parties, and 
the whole transaction must be of such 
a character as to raise a legal presump- 
tion that the accounts are intended 
to apply to the payment or ex- 
tinguishment of each other, and thus, 
like payments on a note, operate 
as an acknowledgment of the prece- 
dent indebtedness. But running ac- 
counts with a partner, though he be a 
surviving partner, and as such has the 
collection of the partnership assets, cer- 
tainly cannot be called an account with 
the firm, and can therefore be of no 
avail to stop the running of the statute 
against a partnership claim. Stewart's 
Appeal, 105 Pa. St. 307. 

A person having an open, mutual 
and current account, purchased an 
open book account which a third per- 
son had against that other, and with- 
out notifying himr of the purchase, en- 
tered it into his account,' and thus 
attempted to save it from the effect 



13 



Definition. 



MUTUAL ACCOUNTS. 



Definition. 



of the statute. The account thus 
assigned was not barred when it 
M'as assigned, but was barred by the 
statute at the time suit was brought, 
unless it formed a part of the mu- 
tual account that already existed be- 
tween them, which was not barred at 
this time. Held, that the item thus as- 
signed to the plaintiff was barred by 
the statute; that, although it had been 
contended that, in reciprocal accounts 
the intention of the law was to com- 
pensate or immediately set off one ac- 
count against the other, and that it was 
just that the law should provide as it 
does, that the limitation should run 
only from the last item of the account; 
yet, in order to do this and to retain the 
justice contended for, it must be con- 
fined to cases where the items are be- 
tween the same parties, known to both, 
and originating between them, or 
adopted by them as part of their mu- 
tual account. Green v. Ames, 14 N. 
Y. 225. 

As to Manner of Keeping a Mutual Ac- 
count. — It has been held that, in order 
to create a mutual account, it is neces- 
sary that each party should keep a book 
account and have charges upon it 
against the other, or, at least, have writ- 
ten charges against each other. Theo- 
bald V. Stinson, 38 Me. 149; Dyer v. 
Walker, 51 Me. 104, 106; Edmonstone 
V. Thomson, 15 Wend. (.N. Y.) 554, 
555. But as to the main cases, it seems 
by the case Lancey v. Maine Central 
R. Co., 72 Me. 34, 37, that they have 
been abrogated on amendment to the 
statute, which provides that "it shall be 
deemed a mutual and open account 
current, where there have been mutual 
dealings between the parties, the items 
of which are unsettled, whether kept or 
proved by one party or both. Stat. 1867, 
ch. 117. And the case of Green v. 
Disbrow, 79 N. Y. i; s. c, 35 Am. Rep. 
496, is considered as settling the law as 
to mutual accounts in New Tork — held 
that an account was a mutual one, al- 
though the account was kept by one 
party only. In Kimball v. Kimball, t6 
Mich. 211, the court, in discussing this 
question where a butcher presented an 
account to the legal representatives of 
a deceased person for meats furnished 
the deceased, which wbuld be barred 
by the statute unless it was a mutual 
account, Cooley, J., said: "It is not 
enough for the claimant to prove that, 
as a meat market man, he supplied and 
charged the deceased with meats. 
Here would be a credit on but one side — 



14 



it would not be mutual. There must 
have been a credit upon the other side; 
that is, on the part of the deceased, 
either expressly given or impliedly; 
that is, a mutual or alternate course of 
deal; in other words, there must have 
been a credit given by the deceased, 
either expressly or impliedl3' by his 
consent of some items of deal. It is not 
necessary that it should be put on a 
book by deceased, or be brought for- 
ward by his representatives here as a 
claim, if the claimant and the deceased, 
at the time, understood that the items- 
credited by the defendant were so in- 
tended to go on the credit of the de- 
ceased upon the account; if not, then 
the items of credit will not operate to 
make a mutual account current." And 
in the case of Abbott v. Keith»ii Vt. 
525, Redfield, J., in discussing- this 
question, says: "It is apprehended, 
therefore, that the particular mode of 
keeping the account, whether on books 
or loose scraps of paper, or without 
any written charges, or whether it is 
all kept in one shape or in different 
forms, as in the present case, is unim- 
portant. If all the items in the expec- 
tation of the parties have reference to 
and are to be adjus-ted in one account- 
ing, it may be considered as one trans- 
action as far as the statute of limita- 
tions is concerned. 

It makes no difference that the ac- 
count is kept by one of the parties . 
only. Chambers v Marks, 25 Pa. St. 
296. 

A party bringing an action on a mu- 
tual account may declare on the debit 
side of his account only when his only 
object is to obtain a balance, leaving 
the other party to file an account in oft"- 
set, or to prove the items of his side of 
the account, in payment, if he can do 
so. If the defendant does neither, he 
can only avail himself of the statute of 
limitations by pleading it. Then the 
plaintiff may avoid it, and bring himself 
within the statutory exception, by 
proving affirmatively as he would any 
other fact, which is material in his case, 
and is traversed that there was such a 
mutual and open account current, and 
items of debit and credit on both sides, 
and then by proving items on either 
side within the statutory period, the ex- 
ception would applv and show that the 
course of action accrued, by the terms 
of the statutory period, before the ac- 
tion brought. "When this is done, the 
action will be deemed brought for the 
balance within the meaning of the stat- 



MUTUAL ASSENT— MUTUAL CREDITS. 



MUTTJAL ASSENT. —Until each party has assented to all the 
terms of a contract it is incomplete, and either party may with- 
draw his offer, unless a given time is agreed upon in which the 
other party may assent,* and where the offer is made by letter, 
the acceptance by written reply takes effect from the time it is 
sent and not from the time it is received ; hence the offer cannot 
be withdrawn in the meantime.^ If the letter contains alterna- 
tive propositions, the officer may elect.* 

MUTUAL COMBAT— (See also ASSAULT ; HOMICIDE).— When 
two persons meet not intending to quarrel, and angry words sud- 
denly arise, and a conflict springs up in which blows are given on 
both sides without much regard to whom is the assailant it is a 
mutual combat.* But it is not necessary that there should be 
mutual blows to constitute a mutual combat although one of the 
parties was killed by the first blow, if an intention to fight existed, 
it was a mutual combat.^ 
. MUTUAL CONSENT.— See note 6. 

MUTUAL CREDITS— (See also BANKRUPTCY; MUTUAL AC- 
COUNT; Receivers; Set-off). — It seems that a mutual credit 
is a knowledge on both sides of an existing debt due to one party 
and credit by the other, party founded on and trusting to that 
debt, as a means of discharging it.' 



ute. Penniman v. Rotch, 3 Mete. 
(Mass.) 216; James v. Clapp, iiC Mass. 
358; Green v. Disbrow, 79 N. Y. i; s. 
c, 35 Am. Rep. 496; Becker v. Jones, 
37 Hun (N. Y.) 35; Cogswell v. Dolli- 
ver, 2 Mass. 217; s. c, 3 Am. Dec. 45; 
Norton v. Larco, 30 Gal. 127; s. i,., 89 
Am. Dec. 70. 

Application of tbe Statutes to Other 
Accounts. — The statute of limitations 
commences to run against the items of 
all accounts that are not mutual ac- 
counts (excepting accounts concerning 
the trade of merchandise between mer- 
chant and merchant in States where 
such a statute may be in force) from 
the date of each item, and unless there 
is a new promise to pay, or evi- 
dence from which the law will im- 
ply a new promise to pay the whole, 
items which are not within the statu- 
tory period will not be saved by items 
that are within it. Weatherwax v. 
Cosumnes Valley Mill Go., 17 Gal. 344; 
Fralor v. Sonora, 17 Gal. 595; Gotes v. 
Harris, Bull U. P. 15b; Todd v. Todd, 
15 Ala. 743; Wilson v. Galvert, 18 Ala. 
274; Harris v. Jackson Go. Agr. Board, 
9 111. App. 271, 274; Reeves v. Hurr, 59 
111. 81; Buntin v. Lagow, i Blackf. 
(Ind.) 372, 373; Looney v. Levy, 35 La. 
An. 1012; Harrison v. Hall, 8 Mo. 
App. 167; Benilett v. Davis, i N. H. 



19; Miller v. Golwell, 5 N. J. L. 510; 
Kimball v. Brown, 7 Wend. (N. Y.) 
322; Edmonstone v. Thomson, 15 
Wend. (N. Y). 554; Hallock v. Losee, 
I Sandf. (N. Y.) 220; Palmer t;. New 
York, 2 Sandf (N. Y.) 318; Waldo --. 
Jolly, 4 Jones (N. Gar.) 173; Hussey v. 
Burgwyn, 7 Jones (N. Gar.) 3S5; Hay 
V. Kramer, 2 Watts & S. (Pa.) 137; 
TurnbuU v. Strohecker, 4 McGord (S. 
Gar.) 210; Hutchinsorf v. Pratt, 2 Vt. 
149; Fitzpatrick v. Phelan, 58 Wis. 
2i;o; Leonard v. United States, 18 Ct. 
of Cl. 382. 

1. Sec. 2727 Ga. Gode. 

2. Sec. 2728 Ga. Gode. 

3. Sec. 2729 Ga. Code. 

4. Gom. V. Webster, 5 Gush. (Mass.) 

295- 

5. Tate V. State, 46 Ga. 148. See 
also I Am. & Eng. Encyc. of Law 807. 

6. The California statute provides 
that in criminal cases the judge's 
charge to the jury must be reduced to 
writing, and that an oral charge can 
only be given "by the mutual consent of 
the parties." In this case it appeared 
from the minutes of the trial that an 
oral charge was expressly waived. 
Held, that this could not be construed 
otherwise than by a mutual consent. 
People V. Kearney, 43 Gal. 3S3. 

7. Munger v. Albany City Nat. 
15 



MUTUAL DEALINGS—MUTUAL INSURANCE. 

MUTUAL DEALINGS.— See note i. 

MUTUAL DEBTS.2 — See also BANKRUPTCY ; MUTUAL AC- 
COUNT; Receivers; Set-off. 

MUTUAL DEMANDS.^ — See also Mutual Account; Re- 
ceivers ; Set-off. \ 

MUTUAL INSUEANCE— (See also BENEFICIAL ASSOCIATION; 
Fire Insurance; Insurance; Life Insurance Societies ; 
Officers of Private Corporations-; Stock and Stock- 
holders). 



I. Definition and Distinctions, 17. 
II. Kinds of Mutual Insurances, 

18. 
I. Premium Note Assessment, 

18. 
^. Benefit Assessment, 19. 

(a) Recent DeveUpment of 

Laiv on the Subject, 19. 
(J) Forms of Organization 
of Benefit Societies, 2 1 . 



(c) Legal Status, 24. 

(d) Internal Management 
and Poivers, 26. 

III. Certificates of Membership, 28. 

1. Essentials and General Feat- 

ures, 28. 

2. Whole Term Life Certifi- 

cates, 33. 

3. Endo'iument, 33. 

4. Fire Policies, 34. 



Bank, 85 N. Y. 590; King v. King, 
9 N. J. Eq. 44-49. 

1. The precise legal definition of the 
words "mutual dealings" does not seem 
to have been settled. In Young v. 
Little, 15 N. J. L. I, the court said: "A 
defendant can only plead payment and 
give notice of set-off where there have 
been mutual dealings between him and 
the plaintiff, and where, if there is a 
balance due the defendant, he can have 
judgment for it against the plaintiff, 
and the same general language is used 
in the case of Cumberland Bank v. 
Hann, 18 N. J. L. 222." Receivers v. 
Paterson G. L. Co., 23 N. J. L, 283. 

Where the plaintiff company had de- 
posited cigars with the defendants to 
secure a debt, an order for winding up 
the company was afterwards made, 
and, the secured debt having been paid 
off, the liquidator of the company 
claimed a return of the cigars, but the 
defendants refused to give them up. 
The liquidator brought an action of 
detinue for the cigars. Their value 
having been assessed, the defendants 
claimed, 6y waj' of counter-claim to 
set off, another debt due from the com- 
pany to them against such value by 
virtue of the conjoint effect of section 
thirty-eight of the Bankruptcy act 
1883 (the mutual dealings sections), 
and section ten of the Judicature act 
1S75, "hich applies to the rules of 
bankruptcy law to cases of winding up. 
Held, that they were not entitled to do 



16 



so on the ground that section thirty- 
eight is only applicable where the 
claims on each rule are such as result 
in pecuniary liabilities, whereas the 
right of the plaintiffs was to a re- 
turn of the goods. Eberle's Hotels & 
Restaurant Co. v. Jonas, 18 Q^B. D. 465. 

2. Where a person has given a town 
a bond in a criminal cause and he has a 
claim against the town, such a claim 
cannot be set off against the bond; 
they are not mutual debts. Town of 
Wallingford v. Hall, 45 Conn. 350. 

In a suit brought by partners upon a 
partnership debt the defendant cannot 
set off a debt against one of the part- 
ners under statutes that provide for the 
selling off of mutual debts between 
parties to an action. Meeker t'. Thomp- 
son, 43 Conn. 77-80. 

3. An action was brought against the . 
city of Boston to recover money due 
the plaintiff for his services as a teacher 
in the public schools in the city. The 
real party in interest was one Odin, to 
whom this claim had been assigned, 
and the city sought to set off certain 
taxes assessed to said Odin, and another 
as assignees of John Odin, which were 
unpaid. ' Held, that taxes assessed upon 
a citizen are neither demands founded 
on a judgment nor contract between 
the parties, and therefore these taxes 
and the said claim did not constitute 
mutual demands. There was a want 
of mutuality in the parties. Pierce v. 
Boston, 3 Mete. (Mass.) 520. 



Definition and 



MUTUAL INSURANCE. 



Distinctions. 



5. Extent and Nature of I^ia- 

bility, 34. 

6. Premium Notes ^ 37. 

7. Effect Upon Contract of Con- 

stitutions and By-laws, 
40. 
IV. Beneficiaries, 46. 

1. Designation, 46. 

2. Limitations and Their Con- 

structions, 50. 

3. Change of B e n e f i ciar y 

52- 
V. Separation of Funds, 57. 

1. Duties of Directors, luith 

Respect to, 57. 

2. Guaranty and Reserve 

Funds, 58. 
(a) Character and Purpose 

58. 
(5) Procurance, 58. 
(c) Preservation, 60. 
(rf) Disposition, 60. 

3. Relief and Disability Fund, 

60. 

4. Mortuary Fund, 60. 

5. Endowment Fund, 61. 

6. Expense Fund, 61. 



VI. Title to Proceeds of Contract, 

61. 
VII. Assessments, 65. 

1. Power and Duty of Officers 

in Making, 65. 

2. /« Collecting, 70. 

3. Action on, 74. 

VIII. Forfeiture and Suspension of 
Contract, 77. 

1. Distinguished from Expul- 

sion, 77. 

2. Essentials, 78. 

3. Waiver, 83. 

4. Payment of Arrearages a}id 

Reinstatement, 87. 
IX. Remedies and Defences on Cer- 
tificates, 88. 
X. Matters of Practice, 98 

1. Parties, 98. 

2. Pleadijig, 99. 

3. Exndence, 102. 

XI. Contribution and Distribution 
Upon Winding Up, 105. 
i. Bv Insolvency Proceedings, 
'105. 
-2. By Dissolution or Abandon- 
ment, 106. 



I. Definition and Distinctions. — The general definition of life 
insurance is applicable to contracts of mutual insurance, with but 
slight modification. The definition given in the statutes of Mas- 
sachusetts relating to insurance on the assessment plan is appli- 
cable to all mutual insurance, since, whether the liability to assess- 
ments be fixed by the giving of premium notes or be left indefinite, 
the method of providing the fund for the payment of losses is the 
same. It is there defined as " any contract whereby a benefit is 
to accrue to a party or parties named therein, upon the death of 
a person, which benefit is in any manner conditioned upon per- 
sons holding similar contracts."^ 

The only distinction between contracts of mutual insurance 
and other insurance contracts consists in the fact that the liqui- 
dation of those of the former class is made from a fund obtained 
by periodical tax upon the members at stated intervals or as re- 
quired, while in other cases the amount stipulated to be paid to 
the beneficiary is absolute and dependent only upon the success 



1. Statutes of Massachusetts, 1885, ch. 
183, § 7; Harding v. Littlehale (Mass.), 
22 N. E. Rep. 738. See Insurance, 
II Am. & Eng. Encyc. of Law 280. 

Among the features distinguishing 
such companies from those who insure 
upon a capital paid up or secured are, 
that each insurer becomes a member of 
the association. The capital is com- 

16 C. of L.— 2 17 



posed of premiums earned in the busi- 
ness and deposit notes. The deposit 
notes constitute the reserved fund, to be 
used as the necessities of expenses and 
losses require. The insurers become 
the mutual indemnifiers of each other 
against damage and loss from the ele- 
ments insured against. Planters' Ins. 
Co. V. Comfort, 50 Miss. 662. 



Kinds of MUTUAL INSURANCE. Mutual iDBurances. 

of the business and the ability of the insurer to pay the stipulated 
indemnity. Mutual insurance is largely done by what are called 
benefit assessment associations. In some of these the fre- 
quency as well as the amount of assessments is left wholly discre- 
tionary with the managing agents of the association ; in other 
cases, premium notes are given for definite amounts, which 
amounts constitute the limit beyond which no assessment may 
be levied. But the manner in which the fund is to be raised to 
pay benefits and losses is unimportant, as, in a definition of mutual 
insurance, it is only an incident and a means of performing such 
contracts. Benefit associations often combine with business ob- 
jects social and fraternal features; but whether organized as clubs, 
lodges and secret societies, or for the sole purpose of conferring 
upon their members the benefits of mutual insurance, the princi- 
ples of insurance law equally apply to their contracts of insurance. 
When they combine business and social objects they have a dual 
nature, and in determining the rights and responsibilities of the 
members with respect to these contracts, this fact must be kept 
constantly in view. Different conclusions will be reached as we 
consider the one characteristic or the other.' 

The general principles applicable to insurance contracts will, in 
this connection, be treated incidentally only, it not being within 
the purview of this article to consider other matters than those 
peculiar to, or specially pertaining to contracts of membership 
in mutual insurance and benefit assessment companies. The pre- 
dominant feature of both benefit associations and other insurance 
companies is the payment of a specific sum on the death of the 
person who is a member of the organization, or whose life is in- 
sured. Both companies and societies may have, and usually do 
have, some careful medical examination, and certificates and the 
contracts of both are void by the violation of certain agreed con- 
ditions, or voidable by reason of misrepresentations prior to enter- 
ing into the contract.** 

Regular proprietary and stock insurance companies may assim- 
ilate the practice of collecting assessments after the manner of 
benefit societies without the insured becoming in any respect 
members of such companies and without entitling them to be called 
mutual insurance companies. In respect to the terms in the 
general insurance law applicable to contracts of membership in 
benefit societies, the " insurer" designates the society itself, while 
the power to designate recipients of the benefits is in the mem- 
bers. These recipients are the beneficiaries. The consideration 
for the contract is made up of assessments and dues, and the in- 
strument evidencing the contract is the certificate of membership. 

II. Kinds of Mutual Insurances— 1. Premium Note Assessment.— 
With respect to the nature of risks assumed mutual insurance may 

1. Mulroy v. Knights of Honor, 28 2. Bacon Benefit Societies and Life 
Mo. App, 463. InR., § .13. 

18 



Kinds of MUTUAL INSURANCE. Mutual Insurances. 

be divided into life, accident, fire, marine, and other classes usually 
engaged in by insurers. With respect to the manner of securing 
the consideration and performing their contracts, mutual insur- 
ance companies are not susceptible of subdivision, although the 
methods of raising funds to meet losses and pay benefits are of 
almost infinite variety. Where a premium note is taken as a 
measure of liability to assessments, part of the note is regularly 
paid to meet assessments. 

The only marked difference between contracts of membership 
in different societies is that, in some, premium notes are given and, 
in others, the limit to the power of assessment is either fixed in 
the charter and by-laws or not at all. 

2. Benefit Assessment — {a) Recent Development of Law on the 
Subject. — Societies formed for the purpose of giving mutual relief 
to their members are of very ancient origin. They were numer- 
ous during the best days of Rome, when most of them were trade 
corporations, devoted to the interests of their crafts, though some 
of them were formed for good fellowship, to promote religion and 
other benevolent objects. As they are now known they are the 
legitimate successors of the clubs and guilds that have existed 
from ancient times in all countries. Through the centuries we 
can trace the co-operative idea from the sodalities and secret so- 
cieties of remote periods to the formation of social and industrial 
associations of the present century, in which may be classed co- 
operative life insurance and fraternal bodies. In the Middle Ages 
social guilds sprang up all over Europe, chiefly in England and 
Germany, and one or more was found in every village. One of 
their prin<:ipal objects was mutual assistance of the members in 
every exigency, especially in old age, in sickness, and in cases of 
impoverishment, if not brought on by their own folly; of wrongful 
imprisonment ; of relief from losses by fire, water or shipwreck ; by 
loans, provison of work, and the burial of the dead.^ 

Notwithstanding their ancient origin, the idea of co-operative 
insurance had not become a matter of considerable and general 
importance until within the last twenty-five years, and as a sub- 
ject of litigation in the courts, such contracts had attracted but 
little attention until within ten years.^ 

1. Brentano's History and Develop- tions established for worthy objects, the 
ment of Guilds. law allowing their creation and exemp- 

2. The earliest case in the United tioh from burdens imposed upon regu- 
States involving questions of benefit lar insurance companies has been taken 
society life insurance was that raised in advantage of b}' the cunning and un- 
1871, in Wetmore -v. Mutual Aid Ben. scrupulous for the purposes of private 
L. Ins. Assoc, 23 La. An. 770. The next gain. 

case was decided in 1875. Marj'land The legislatures of California, of New 

Mut. Ben. Assoc, etc. v. Clendinen, 44 York and of several other States early 

Md. 429; s. c, 22 Am. Rep. 521. Since realized the magnitude of the trust 

these cases there has been a constant necessarily reposed by the people in 

increase year by year relating to con- certain corporations, such as banking 

tracts betweenienefit societies and their and/insurance companies; and, in order 

members. Like many other institu- to prevent gross abuses of trust and 

19 



Kinds of 



MUTUAL INSURANCE. 



Mutual Inaurauces. 



Many of the secret fraternal orders in the United States have 
adopted the mutual benefit insurance system for relieving distress 
and providing against accident and misfortune among their mem- 
bers. Prominent in this respect are the Free Masons and Odd 
Fellows. Sometimes the insurance department is controlled and 
conducted directly by the organization, at others it is a separate 
auxiliary association. 



confidence b3' them, enacted stringent 
laws for their restriction and regula- 
tion. The evident intendment of these 
enactments, taken as a whole, is the 
protection of the people froin imposi- 
tion and loss at the hands of dishonest 
and irresponsible insurers, and inci- 
dentlj the protection of legitimate, sol- 
vent and responsible companies which 
have complied with those restrictions 
and submitted to the burdens imposed 
by law, from unfair and unequal com- 
petition on the part of those of a differ- 
ent character which have not. It may, 
therefore, be stated as a fundamental 
principle that whatever has the effect 
of defeating either directly or indirectly 
this manifest purpose of the law is 
usurpation and a violation of its spirit. 
The usual modus operandi of "benevo- 
lent" insurers is for five or more indi- 
viduals to sign, acknowledge and file in 
the office of the county clerk articles of 
incorporation, reciting that Vciey do in- 
corporate, not for profit, but for benevo- 
lent objects — that is, "to guard its mem- 
bers against the ills of pecuniary want 
during life, and especially during the 
period of infirm old age, and, at death, 
to make provision for their families and 
friends." How do they proceed to ac- 
complish those benevolent objects.'' It 
is hy visiting the sick and by relieving 
distress! Do they provide hospitals 
and alms houses as provisions against 
the disabilities and necessities of in- 
firm old age? In case of a husband's 
death, do they hunt up the widow and 
orphans and present them with a fund 
collected equally and without charge 
from all surviving members, as author- 
ized by the California Act of 1S74, con- 
cerning mutual beneficial and relief as- 
sociations.' If they did all or any of 
these things and nothing more, no ques- 
tion could ever be raised as to the au- 
thority for the acts done under the acts 
of incorporation. Benevolent practices 
for which it is not only legal but com- 
mendable to incorporate .ind exercise 
a franchise under that act, would, in 
that case, be a public as well as a private 
blessing. 



20 



From a candid consideration of the 
character of business done by this class 
of associations it is easy to see that 
their business is not purely benevolent 
nor their motives entirely disinterested, 
whatever the character they give them- 
selves in their articles and constitutions. 
There are only two classes of motives 
which a'ctuate human beings — selfish 
and unselfish. The individuals who 
conduct the business under consider- 
ation are prompted by motives belong- 
ing to one or the other of these classes 
— that is, they are pushed forward by 
philanthropic zeal, or else the business 
yields them a profit. In the latter case 
the business does not come within any 
of the exceptions of benevolent asso- 
ciations from the restrictions of the in- 
surance laws, howmuchsoever it osten- 
sibly partakes of their nature in the 
higfi-sounding titles assumed by them. 
The section in the California Civil Code 
(451) reads as follows: "All associa- 
tions or secret orders, and other benevo- 
lent or fraternal co-operative societies, 
incorporated or organized for the pur- 
pose of mutual protection and relief of 
its members, and for the payment of 
stipulated sums of money to its mem- 
bers or to the families of deceased mem- 
bers, and not for profit, are declared 
not to be insurance companies in the 
sense and meaning of the insurance 
laws of this State, and are exempt from 
the provisions of all existing insurance 
laws of this State." 

While the contracts made b}' most 
associations of this class are in form 
and substance life insurance policies, it 
borders on the libellous to designate the 
business done by them as life insurance. 
It is classing with a legitimate and 
honorable calling that which often 
turns out to be grand larceny on a 
petty scale and pettj- larceny on a 
grand scale. But as it takes the place 
of life insurance and is believed and 
accepted as such by many, and pre- 
vents insurance in regular companies, 
it practically defeats the salutary pro- 
visions of the insurance laws and must 
be dealt with, to all practical intents 



Kinds of 



MUTUAL INSURANCE. Mutual InBuranoes. 



The English mutual benefit organizations possess the general 
feature of benefit associations in the United States, and those of 
both countries may well be called "the mutual assurance societies 
of the poorer classes, by which they seek to aid each other in the 
emergencies arising from sickness and death and other causes of 
distress."^ 

{b) Forms of Organization of Benefit Societies. — Benefit societies, 
like other associations, of persons for agreed and lawful purposes 
may be simply voluntary associations, or they may become inco- 
porated by special act or under general laws. Whether incorpo- 
rated or not is important only as to determining their relations to 
third parties and the rights of the latter with respect to obligations 
growing out of the dealings with such associations. With reference 
to the contracts of the members with the association and their 
relative rights with each other, the fact of incorporation is unimpor- 
tant. If incorporated, the special act or general incorporation law, 
together with such rules and regulations as they may adopt, enter 
into and affect the contracts of membership. If unincorporated, 
such by-laws alone, in connection with their contract of associa- 



and purposes, as life insurance, legal or 
illegal. The articles of incorporation, 
standing alone, are without objection. 
It is in the conception and execution of 
benevolent designs that these benefac- 
tors of the race cause trouble. 

But, granting that their contracts are 
honestly and impartially carried out, 
let us ask, as a legal proposition, what 
privilege is exercised, what advantage 
enjoyed and what opportunity for profit 
furnished companies which have com- 
plied with the laws by providing the 
guarantee fund and making annual 
statements to the State insurance com- 
missioner that are not equally possessed, 
enjoyed and exercised by the class un- 
der consideration.? And as the busi- 
ness of life, accident and health in- 
surance is a franchise, a quo toarranto 
proceeding will lie to forfeit the fran- 
chise ursurped by this class of com- 
panies. 

1. In England the law which now 
regulates friendly societies is that of 38 
and 39 Vict., ch. 60, amended in 39 and 
40 Vict., ch. 32. By it they are defined 
as "Societies established to provide by 
voluntary subscriptions of tlie members 
thereof, with or without the aid of do- 
nations, for the relief or maintenance 
of the members, their husbands, wives, 
children, fathers, mothers, brothers 
or sisters, nephews or nieces, or wards 
being orphans, during sickness or other 
infirmity, whether bodily or mental, in 
old age, or in widowhood, or for the re- 



lief or maintenance of the orphan chil- 
dren of members during minority; for 
insuring money to be paid on the birth 
of a member's child, or on the death 
of a member; or, for the funeral expen- 
ses of the husband, wife or child of a 
member, or of the widow of a deceased 
member; or, as respects persons of the 
Jewish parish, for the payment of 
a sum of mone}' during the period of 
confined mourning; for the relief or 
maintenance of the members when on 
travel in search of employment, or 
when in distressed circumstances, or in 
case of shipwreck, or loss or damage of 
or to boats or nets; for the endowment 
of members or nominees of members 
at any age; for the insurance against 
fire, to any amount not exceeding £15, 
of the tools or implements of the trade 
or calling of the members." 

Mr. Bacon, in his treatise on benefit 
societies and life insurance, gives com- 
prehensive and valuable information on 
the subject of benefit insurance by 
secret societies, and furnishes a list of 
leading beneficiary orders in the United 
States, together with their aggregate 
membership, p. 16. On p. 17, he says: 
"Closely allied to the beneficiary, or 
mutual aid life insurance organizations, 
are the secret ritualistic societies and 
charitable fraternities, whose character- 
istic features are good fellowship, social 
enjoyment and benevolence. The Free- 
masons, Odd Fellows and Knights of 
Pythias are examples. These numer- 



21 



Kinds of 



MUTUAL INSURANCE. 



Uutual Insurances. 



tion, govern their rights and limit their liabiHties. A contract of 
assurance effected with a friendly society unincorporated is gen- 
erally not less beneficial than a policy effected with an incorporated 
company.^ 

While a majority of benefit societies are fraternal and social in 
their organization and have secret meetings and rituals, many are 
organized and conducted for the sole purpose of enjoying the 
benfits of co-operative insurance. Again, societies organized for 
fraternal and social objects, and having secret meetings and rituals, 
are composed of several distinct but not entirely disconnected 
judicatories or assemblies. The constitution and organization of 
such orders and societies into superior and subordinate lodges 
and assemblies, according to States and districts, and the enact- 
ment of numerous rules and regulations governing their relations 
to each other, give rise to many complex and difificult questions, 
for the settlement of which no known rules have been established 
by the courts, as much depends in each case upon its peculiar 
facts. However, where the element of property rights of members 
is the principal matter in dispute, the law makes no distinction be- 
tween societies which are incorporated and those that are merely 
voluntary, but it does between questions involving the property 
rights of members and those concerning discipline only or policy 
of government.^ 



ous societies are secret in their organ- 
ization and work, use a ritual and have 
initiatory ceremonies, and their mem- 
bers are pledged to secrecy. They are 
organized on the plan of local assem- 
blies or lodges under the government 
and control of grand or supreme lodges. 
Some, like the Masons, make no promise 
of financial aid to members, but are 
charitable only, donating when neces- 
sity requires. Others, such as the Odd 
Fellows, expressly agree to pay stated 
amounts to their members in sickness 
or disability, and at death a certain sum 
for funeral expenses, and also to look 
after the widow and orphan. These 
societies have no life insurance feat- 
ure." 

1. Courtenay v. Courtenay, 3 Jones 
& La. T. 519. 

Legal incorporation implies confor- 
mity with the terms of the charter or 
general law, as in the case of other cor- 
porations. Morawetz on Corp., §§ 27, 
28, 641-45, 939. 

A society may acquire any rights 
conferred in the law under which it 
seeks to become incorporated. Massa- 
chusetts Catholic Order of Foresters i<. 
Callaghan, 146 Mass. 391. 

They have no implied powers other 
than those necessary for the purpose of 



carrying into effect the powers expressly 
granted. Ang. & Ames on Corp. iii. 

Articles of association are to be con- 
sidered in the light of an agreement be- 
tween the members, extending or limit- 
ing any general obligation which binds 
them to each other as members. 
Protchett v. Schaefer, 11 Phila. n6. 
See Tyrrell v. Washburn, 6 Allen 466; 
Hj'de V. Woods, 2 Sawyer 655; af- 
firmed 94 U. S. 523; Leech ■6. Harris, 2 
Brewst. 571. 

A voluntary association may do any 
legal act within the scope of its consti- 
tution and by-laws. The members are 
governed by the principles and rules of " 
partnership and agency as respects 
third parties. Leech v. Harris, 2 
Brewst. (Pa.) 571; Ridgley -v. Dobson, 
3 W. & S. (Pa.) 118; Bullard v. Kin- 
nev, 10 Cal. 60; White v. Brownell, 3 
Abb. Pr., N. S. (N. Y.) 318; Gorman 
V. Russell, 14 Cal. 537; Wells v. Gates, 
18 Barb. (N. Y.) 554; Flemyng v. Hec- 
tor, 2 M. & W. 171; Dow V. Moore, 47 
N. H. 419; Robinson v. Robinson, 10 
Me. 240; Protchett v. Schaefer, 11 
Phila. (Pa.) 166. 

2. In Bauer v. Samson Lodge etc., 
102 Ind. 262, the court said: "Claims 
for money due by virtue of an agree- 
ment are unlike mere matters of disci- 



22 



Kinds of 



MUTUAL INSURANCE. 



mutual Insurances. 



The result of all the decisions in this country and in England is 
that, with respect to property rights and contracts affecting prop- 
erty, the courts will apply the same principles to voluntary as to 
incorporated companies. 

But while questions of discipline and government are constantly 
distinguished from those affecting pecuniary rights growing out 
of a contractual relation between the members and the organiza- 
tion, the right of property is often dependent on the question of 
doctrine, discipline, ecclesiastical law, rule, custom, or church 
government, and, in so far as the provisions of any of these are 
reasonable and not in conflict with law and the plain principles of 
justice, they will be allowed to control. A civil court will accept 
the decision which the members of a -corporation or their duly 
authorized and appointed agents have made as conclusive, and be 
governed by it in its legitimate application in the case before it, 
whether involving an insurance or other contract. ^ 

Since a corporation no less than a voluntary association is a 
mere association of persons for an agreed and lawful purpose, and 
since the real nature of the corporation depends upon the charter 
under which it is formed and must be determined by reference 



pline, questions of doctrine or of policy, 
and are not governed by tlie same 
rules. . . . One who asserts a claim 
to money due on a contract occupies 
an essentially different position from 
one who presents a question of disci- 
pline, of policy or of doctrine of the 
order or fraternity to which he be- 
longs." 

All questions of policy, discipline 
and internal government and custom, 
when settled by judicatories of churches, 
fraternal associations and societies are 
generally accepted by the courts as 
final; but the rule is different when 
property rights are involved. Watson 
V, Jones, 13 Wall. (U. S.) 679. 

In the case of Smith v. Smith, 3 Des- 
saus, 557, involving the right to a certain 
fund belonging to the incorporated 
, Grand Lodge of Ancient York Masons, 
the action was brought in behalf of a 
voluntary association, claiming to be 
a successor of the corporation under 
the name of Grand Lodge of South 
Carolina. Incidentally, the distinction 
between certain masonic bodies and 
doctrines was discussed. The court 
laid down the rule that the Grand 
Lodge of Freemasons cannot make new 
regulations subversive of fundamental 
principles and landmarks without the 
clear consent of the subordinate lodges, 
and that the officers of the corporation 
composed of several integral parts 



could not dissolve the corporation with- 
out the full consent of the great body of 
the society. See also Goodman v. 
Jedediah Lodge etc., 67 Md. 117; Court 
Mount Royal v. Boulton, Q^B. (Que- 
bec) 1S81; District Grand Lodge v. 
Jedediah Lodge, 65 Md. 236. But see 
Altmann v. Benz, 27 N. J. Eq. 331. 

Austin V. Searing, 16 N. Y. 112; s. c, 
69 Am. Dec. 675, is a leading case 
upon the rights growing out of the 
complex organization of the Odd Fel- 
lows' fraternity, where all the constitu- 
ent bodies were incorporated. 

1. Wilson V. John's Island Church, 2 
Rich. Eq. (S. Car.) iq2; Gibson v. Arm- 
strong, 7 B. Mon. (Ky.) 481; Ferraria 
V. Vasconcelles, 23 111. 403; Watson v.i 
Avery, 2 Bush (Ky.) 332; Harmon v. 
Dreher, i Speer's Eq. (S. Car.) 87; 
Smith V. Nelson, 18 Vt. 511; Shannon 
V. Frost, 3 B. Mon. (Ky.) 253; Miller 
•». Gable, 2 Denio (N. Y.) 492; Chase 
V. Cheney, 58 111. 509; s. c, 11 Am. 
Rep. 95; Watson v. Farris, 45 Mo. 
183; German Reformed Church v. Sei- 
bert, 3 Pa. St. 291; McGinnis w. Wat- 
son, 41 Pa. St. 21. See, as to jurisdic- 
tion, Watson V. Avery, 2 Bush (Ky.) 
332; Watson V. Avery, 3 Bush (Ky.) 
635; Altman v. Benz, 27 N. J. Eq. 331; 
Hendrickson v. Shotwell, i N. J. Eq. 
577; Lloyd v. Loring, 6 Vesey 773; 
CuUen V. Duke of Oueensborough, I 
Bro. C. C. loi. 



23 



Kinds of MUTUAL INSURANCE. Mutual Insurances. 

thereto,^ it follows that voluntary associations have many char- 
acteristics and rules in common, and all rights of the members and 
their powers, as well as of the association, are derived from the 
original compact between them contained in the constitution and 
by-laws. 

Such constitution and by-laws, no less than a charter, regulate 
the admission of members and define their qualifications. The 
same rules of construction apply to the one as to the other, and a 
member may be expelled in accordance with the by-laws and con- 
stitution of a voluntary association with like effect as by compli- 
ance with those of a corporation.^ 

(c) Legal Status. — It is both unnecessary and foreign to the 
present purpose to consider the statutory enactments found in 
most, if not quite all, the States governing the business of insur- 
ance, and seeking to exempt from their provisions societies organ- 
ized for benevolent and charitable purposes, having mutual bene- 
fit insurance as an adjunct, from the requirements and restrictions 
of such laws. The principal requirements of regular insurance 
companies are the deposit of a guaranty fun-d with a State officer, 
usually an insurance commissioner, and the making of periodical 
reports of the volume of business and financial condition to such 
officer.^ 

The courts have often been called upon to determine whether 
benevolent societies and benefit associations were really such, or 
came within the requirements intended for insurance companies. 
It is generally held, where the contract provides for the payment 
of a specified sum at death, or of benefits periodically, or upon 
certain contingencies, that it is one of insurance, and that the cor- 
poration or voluntary association is amenable to all the provi- 
sions and regulations concerning insurance companies.* 

1. Morawetz Priv. Corp., 5§ 6, 7, Rule v. People, 118 III. 492; State V, 
316, 580; Com. V. St. Patrick's Soc, 2 Citizens" Ben. Assoc, 6 Mo. App. 163; 
Binn. (Pa.) 441; 4 Am. Dec. 453; Leech State v. Vigilant Ins. Co., 30 Kan. 585; 
V. Harris, 2 Brewst. (Pa.) 571. State v. Merchants' Exchange Ben. 

2. In Diligent Fire Co. v. Com., 75 etc. Soc, 72 Mo. 146; State r;. Farmers' 
Pa. St. 291, the court said: "It is true etc. Ben. Assoc, 18 Neb. 276; State v. 
the power of admitting new members Bankers' & Merchants' Mut. Ben. 
being incidental to a corporation aggre- Assoc, 28 Kan. 499; Bolton t^. Bolton, 
gate, it is not necessary that such 73 Me. 299; State v. Standard L. Assoc, , 
power be expressly conferred by the 38 Ohio St. 281; Farmer v. State, 67 
statute. Yet when the statute does Tex. 561 ; State v. Miller, 66 Iowa 26. 
limit and restrict the power, it erects a In State v. Whitmore, 75 Wis. 332, a 
barrier beyond which no by-laws can construction was given to Laws Wis. 
pass." 1879, ch. 204, § 1, which provides that 

3. Pub. Stat. Mass. 1880, ch. 115, %^ "the secret, beneficiary, charitable and 
S-io; Amended Stat. 1882, ch. 195, % 2; benevolent orders of Free Masons, Odd 
Rev. Stat. Mo. 1879, §§ 972, 973; Rev. Fellows, and Knights of Pythias (nam- 
Stat. Ohio 1880, § 3630; 111. Stat. 1885, ing several), are hereby declared not 
ch. 32, § 31. to be life insurance companies in the 

4. State V. Critchett, 37 Minn. 13, sense and meaning of the general laws 
following Foster v. Pray, 35 Minn. 458; of this State relating to life insurance 
State -v. Trubey, 37 Minn. 97; Com. v. and life insurance companies; and such 
Wfetherbee, 105 Mass. 149; Golden societies, orders and associations are, 

24 



Kinds of 



MUTUAL INSURANCE. Mutual insurances. 



The decisive test applied by the courts is the object for which 
they are organized and the consideration upon which the con- 
tracts of membership are based. 

It may be important, as a guide for determining whether the 
object of the company be benevolence or mutual profit of its 
members, to enquire whether any provision has been made for 
carrying out the benevolent purposes specified in the charter or 
articles.* 



and shall hereafter be, exempt from the 
provisions of said general laws." By 
various amendments the provisions of 
the act were extended to other societies. 
Laws 1883, ch. 94, added to the section: 
"and no other societies are hereby de- 
clared to be exempt." It was held that 
an Odd Fellows' association, duly incor- 
porated under the laws of another 
State for the purpose of fraternal be- 
nevolent insurance upon the co-opera- 
tive or assessment plan, among the 
members of the Independent Order of 
Odd Fellows, was exempt under this 
statute and amendments thereto, though 
it was not named in that act 01 :iny 
amendment thereto. 

By Rev. Stat. 111. 1874, ch. 32, relat- 
ing to corporations not for pecuniary 
profit, it is provided (section 31), that 
"associations and societies which are in- 
tended to benefit the widow, orphans, 
heirs and devisees of the deceased 
members thereof, and where no annual 
dues or premiums are required, and 
where the members shall receive no 
money as profit or otherwise, shall not 
be Jeemed insurance companies." De- 
fendant organized under this chapter, 
and by the certificate filed with the 
secretary of State declared its purpose 
to be "to give financial aid and benefit 
to the widows, orphans and heirs or 
devisees of deceased members." Held, 
that a clause in a certificate issued to a 
member agreeing to pay him, on his 
arriving at a certain age, a sum equal 
to the number of members in his divi- 
sion, was ultra vires, but that it did 
not invalidate the certificate as one to 
pay the benefits to his widow, etc. 
Rockhold V. Canton Masonic Mut. 
Ben. Assoc. (111.), 19 N. E. 710. See 
also Golden Rule v. People, 118 111. 
492. 

A scheme of a so-called benevolent 
association, which depends for its suc- 
cess upon the lapsing of a very large 
proportion of its membership, was 
considered to be clearly not within the 
meaning of the New Jersey statute au- 



thorizing the formation of benevolent 
and charitable institutions. And it 
was held that the court would appoint 
a receiver to take charge of and dis- 
tribute the assets among the members. 
Peltz V. Supreme Chamber of the Or- 
der of Financial Union (N. J.), ig Atl. 
Rep. 668. 

In Pennsylvania, a beneficial associa- 
tion whose design was not to indem- 
nify against loss, but to accumulate a 
fund from the contributions of its mem- 
bers to be used in their own aid or re- 
lief in case of sickness, injury or death, 
was held not an insurance compam-, but 
within the provisions of Act Pa., April 
29th, iS74,cl. 9, allowing the organization 
of societies for beneficial or protective 
purposes. Com. v. Equitable Ben. 
Assoc, 25 W. N. C. (Pa.) 34; s. c, 18 
Atl. Rep. 1 1 12. 

But a different view was taken by 
the Supreme Court of Iowa upon a 
similar state of facts, the statutes of the 
two States on the subject being sub- 
stantially the same. State v. Nichdls 
(Iowa), 41 N. W. Rep. 4. 
' 1. In State v. Bankers' & Merchants' 
Mut. Ben. Assoc, 23 Kan. 499. the 
court said: "Elaborate and stringent 
provisions are made in relation to the 
beneficiarj' fund payable on the death 
of a member, and for collecting and 
enforcing the payment of such amounts 
as are assessed on each member; but 
we have been unable to discover any 
provision for enforcing any of the other 
declared objects of the association 
stated in the preamble to the constitu- 
tion of the supreme lodge, including 
'sick benefits.' If the provisions of a 
fraternal character be eliminated from 
the association, its primary and only 
purpose is that of a life insurance or- 
ganization." See Bolton v. Bolton, 73 
Me. 299; Folmer's Appeal, 87 Pa. St. 
133; Illinois Masons' Ben. Soc. v. 
Winthrop, 85 111. 537; Illinois Masons' 
Ben. Soc. v. Baldwin, 86 III. 479; State 
V. Citizens' Ben. Assoc, 6 Mo. App. 
163. 



25 



Kinds of 



MUTUAL INSURANCE. Mutual insurances. 



" So far as corporations, carrying on a life insurance business, 
either on the plan of annual, semi-annual or quarterly premi- 
ums and the accumulation of a reserve fund, or upon the 
new assessment plan, where calls are made, as necessity requires, 
monthly or less or more frequently, are concerned, it may be said 
that it is hard to conceive of any reason why such organizations 
should be governed by any rules different from those regulating 
other corporations."^ 

The same rule has been applied to incorporated lodges, superior 
and subordinate, and to other secret, social and benevolent organ- 
izations.* 

((/) Internal Management and Powers. — An incorporated benefit 
assessment association has the powers derived from its charter or 
the general law under which it is incorporated, as other corpora- 
tions. No more can such a corporation than any other change 
the purpose for which it was organized, as specified in its articles, 
without the consent of all its members.^ 



1. Bacon on Ben. Socs. & Life Ins., § 
78. 

A "mutual reliance society," consti- 
tuted for pecuniary gain, cannot be 
formed under the act for the incorpora- 
tion of benevolent, charitable, scientific 
and missionary societies. People v. 
Nelson, 46 N. Y. 477. 

2. Erdman v. Mutual Ins. Co. etc., 
44 Wis. 376; Bolton V. Bolton, 73 Me. 
299. 

3. For application of principle to 
business corporations, see Zabriskie v. 
Hickensack etc. R. Co., 18 N. J. Eq. 
17S; Morton -v. Smith, 5 Bush (Ky.) 
467; Marston v. Durgin, 54 N. H. 347; 
Torrey v. Baker, i Allen (Mass.) 120; 
Hochreiter's Appeal, 93 Pa. St. 479; 
Ray V. Powers, 134 Mass. 22; Abels v. 
McKeen, 16 N. J. Eq. 462; Kean v. 
Johnson, 9 N.J. Eq. 401. 

A mutual fire company, organized 
under Laws Wis., 1885, ch. 421, ^ 2, 
which enacts that "no such corporation 
shall insure any property other than 
detached dwellings and their contents,' 
farm buildings and their contents, live- 
stock in possession and running at 
large, farm products on premises and 
farming implements," has no power to 
insure an incubator building. O'Neil 
V. Pleasant Prairie Mut. F. Ins. Co., 71 
Wis. 621. 

When the statutes under which mut- 
ual fire insurance companies are organ- 
ized confine their business to certain 
territory, as to three counties, policies 
issued outside the three counties men- 
tioned in a company's charter are ultra 



vires and void. Eddy v. Merchants' 
etc. Mut. F. Ins. Co., 72 Mich. 651. 

Under Rev. Stat. Mo. 1879, § 5988, a 
mutual company does not expose itself 
to the charge of doing business upon 
the joint stock plan by receiving all 
cash premiums on all policies running 
less than six years; nor is their any ob- 
jection to its issuing policies for less 
than six years, except policies issued on 
account of notes given to the organiza- 
tion of companies organized without a 
guarantee fund, which are expressly re- 
quired to run for not less than six 
years. State v. Manufacturers' Mut. 
F. Ins. Co., 90 Mo. 311. 

The Massachusetts statute provides 
that certain benevolent associations 
may, "for the purpose of assisting the 
widows, orphans or other persons de- 
pendent upon deceased members, pro- 
vides in its by-laws for the payment by 
each member of a fixed sum to be held , 
by such association until the death of a 
member occurs, and then to be forth- 
with paid to the person or persons en- 
titled thereto." The supreme court of 
that State construed this statute ' to 
mean that associations organized under 
this provision have no power to create 
a fund for other persons than of the 
classes named. Massachusetts Catho- 
lic Order of Foresters v. Callahan, 146 
Mass. 391 ; Commercial League Assoc. 
V. People, 90 111. 166; Elsey v. Odd 
Fellows' Mut. Relief Assoc, 142 Mass. 
224; Benefit Soc. v. Dugre, 11 Revue 
Legale (Qucb.) 344. 

Members of a mutual fire and marine 



26 



Kinds of 



MUTUAL INSURANCE. Mutual insurances. 



They have no power to provide for, or to make contracts of 
insurance for the benefit of others than those Hmited in the char- 
ter or general laws.^ 

And tlie same rule applies with respect to the powers of the 
majority and the rights of the minority as in other private cor- 
porations.* 

The relative rights of members as such are governed by the 
terms of the contracts of membership, and are regulated by the 
articles of association or constitution and by-laws.* 

If the association be voluntary — that is, unincorporated — the 
members are governed by such by-laws, rules and regulations as 
they may agree upon. In all cases of dispute as to rights or 
duties of such bodies, the original compact is the measure by 
which a decision is to be reached.* 



company were held estopped from 
questioning its powers after iiaving liad 
full notice of an arrangement in whch, 
they had acquiesced and which had been 
advertised for more than twenty years. 
Doane v. Millville Mut. M. & F. Ins. 
Co., 43 N. J. Eq. 522. 

1. State V. Moore, 38 Ohio St. 7. 

In Rockholder v. Canton Masonic 
Mut. Ben. Assoc. (111.), 19 N. E. Rep. 
710, it was held that the defendant was 
not estopped to evoke the doctrine of 
ultra vires, because plaintiff had, from 
time to time after receiving his certifi- 
cate, paid assessments, which were 
turned over by defendant to the persons 
entitled thereto under beneficiary certi- 
ficates. 

To same effect is Bloomington Mut. 
L. Ben. Assoc, v. Blue, 23 111. App. 
51S. 

2. Sizer v. Daniels, 66 Barb. (N. Y.) 
426; Richmond v. Judy, 6 Mo. App. 
465; State V. Central Ohio Mut. Relief 
Assoc, etc., 29 Ohio St. 399; State v. 
Mutual Protection Assoc, 26 Ohio St. 
19; State V. People's Ben. Assoc, 42 
Ohio St. 579; State v. Standard L. 
Assoc., 38 Ohio St. 281; National Mut. 
Aid Assoc. V. Gonser, 43 Ohio St. i. 

3. One who becomes a member of a 
mutual insurance company after it 
has . practically adopted the provi- 
sions of a statute authorizing the 
property insured to be divided into 
classes, and acted thereon for several 
years, cannot object, in an action to re- 
cover an assessment upon his deposit 
note, that the same were not formally 
adopted at a meeting regularly called 
for that purpose. Citizens' Mut. F. Ins. 
Co. V. Sortwell, 8 Allen (Mass.) 217. 

4. Austin V. Searing, 16 N. Y. 112; 



s. c, 69 Am. Dec. 665; Chamberlain v. 
Lincoln, 129 Mass. 70; Leech v. Harris, 

2 Brewst. (Pa.) 587; White v. Brownell, 

3 Abb. Pr., N. S. (N. Y.) 318; Lowry -■. 
Stotzer, 7 Phila. (Pa.) 397. 

The construction of all such constat- 
ing instruments is the AvAy of the court, 
and neither the opinions of the officers 
of the society nor of its custom and 
usage in respect to their interpretation 
are admissible evidence in actions grow- 
ing out of their contractual relation, if 
the language used be not ambiguous. 
Wiggin V. Knights of Pythias, 31 Fed. 
Rep. 122; Davidson v. Knights- of Py- 
thias, 22 Mo. App. 263; Manson v. 
Grand Lodge A. O. U. W., 30 Minn. 

509- 

But, in cases involving property 
rights, a member may at once resort to 
the courts. He is not bound to leave 
the determination of such rights to the 
tribunals of the order or association; 
but if he consent to an adjudication by 
the society, he is bound as by an arbi- 
tration, in the absence of oppression, 
fraud, or the violation of the principles 
of natural justice. It is not within the 
power of any organization, by the pro- 
vision of its constitution and by-laws, 
or by the conduct of its internal aifairs, 
to deprive a member or class of mem- 
bers of any substantial property right. 
Forfeiture of the conventional charter 
of a society incorporated by the State 
will not divest its property, nor can the 
property be affected by a secession of 
part of its members. Even if unincor- 
porated, the majority of a society have 
generally the right to cut loose from a 
superior governing body, and the mi- 
nority have no redress if the property 
is used for the general purposes for 



27 



Certificates of 



MUTUAL INSURANCE. 



Uenibersliip. 



Ill CERTiriCATES OF Membeeship — 1. Essential and General 
Features. — Certificates of membership, while differing in many re- 
spects, usually contain certain similar predominant features. 
These are, the provisions whereby the party becomes a member; 
the agreement to pay dues, assessments, and such other contribu- 
tions as may be provided for in the contract and to abide by the 
constitution and by-laws of the association. On the part of the 
society, to pay benefits and death losses, as authorized by the 
charter or articles of association, either to the member or to such 
other person as is designated in the contract ; or the member may 
be authorized in the certificate to designate some other person, or 
to change from the one designated in the contract to any other 
he may afterwards prefer. In all cases the document issuing- to 
the members of a benefit society must be such as its laws pre- 
scribe. Certificates of membership are set out in full in the fol- 
lowing cases:^ 

Such certificates are, in legal contemplation, policies of insurance, 
and are in many respects governed by the general rules of law 
which apply to insurance contracts.^ 

1. Supreme Lodge Knights of Honor 
w. Johnson, 78 Ind. no; Richmond v. 
Johnson, 28 Minn. 447; Wendt v. Iowa 
Legion of Honor, 72 Iowa 682; Grand 
Lodge A. O. U. W. v. Child, 70 Mich. 
163; Supreme Lodge Knights of Pjth- 
ias V. Schmidt, 98 Ind. 374; Supreme 
Council of Royal Templars of Tem- 
perance V. Curd, HI 111. 286; Supreme 
Comniandery Knights of the Golden 
Rule V. Ainsworth, 71 Ala. 437; s. u., 
46 Am. Rep. 332; Holland v. Taylor, 
HI Ind. 121. 

The charter provided that "every 
person who shall become a member of 
this company by effecting an insurance 
therein, shall, before he receives his 
policy, deposit with the treasurer the 
sum of twenty-five cents for every 
$1,000 worth of property he shall have 
insured." Plaintiff had a policy on his 
barn, and subsequently applied for an 
insurance on the contents of the barn. 
Held, that at the time of the latter ap- 
plication he was a member. Farmers' 
Mut. Ins. Co. V. Mylin (Pa.), 15 Atl. 
Rep. 710. 

A new benefit certificate issued to 
change the beneficiary, upon applica- 
tion made in accordance with the by- 
laws of the union, and signed by the 
supreme president and secretary of the 
union, and sealed with the seal of the 
supreme union, is riot invalid because 
not signed and sealed by the officers of 
the subordinate union. Fiske -v. Equit- 
able Aid Union (Pa.), ii Atl. Rep. 84. 

2. Elkhart Mut. Aid etc. Assoc, v. 



which it was acquired. See Bacon on 
Ben. Soc. & Life Ins., § 116. 

The authority of subordinate lodges 
to waive the requirements of the laws 
of the order of which they are constit- 
uent parts, in regard to assessments, 
has been questioned. Borgraefe f. Su- 
preme Lodge Knights of Honor, 22 
Mo. App. 127. 

But where the constitution of the 
grand lodge of a fraternal order pro- 
vided that, in case of failure by a sub- 
ordinate lodge to do certain things, it 
"shall be deemed an extinct lodge, and 
its charter shall be forfeited," it was 
held that, as the subordinate lodge was 
incorporated under the State laws, its 
suspension by the grand lodge had no 
effect on its legal existence, and gave to 
the representatives of the grand lodge 
no right to the possession of property of 
which the former was the owner, and in 
which the grand lodge had no right, 
title or interest. Merrill Lodge No. 
299, I. O. G. T. V. Ellsworth, 78 Cal. 166. 

Where the minoritj' members of a 
lodge had seceded from the lodge, and 
refused to pay dues, it was held that 
they had thereby forfeited their certifi- 
cates. The court considered that as 
long as the member paid his dues, and 
remained in good standing, his certifi- 
cate could not be forfeited by a forfeit- 
ure of the charter of the lodge de- 
clared \>y the general order, but might 
be for his failure or refusal to pa3' such 
dues. Goodman v. Jedidjah Lodge, 67 
Md. 117. 



28 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



Such contracts are none the less contracts of mutual insurance, 
because the amount to be paid by the corporation is not a gross 
sum, but a sum graduated by the number of members holding 
similar contracts ; nor because a portion of the premiums is to be 
paid upon the uncertain periods of the deaths of such members ; 
nor because in case of nonpayment of assessments by any member, 
the contract provides no means of enforcing payment thereof, but 
merely declares the contract to be at an end, and all moneys pre- 
viously paid by the assured, and all dividends and credits accrued 
to him, forfeited to the company.^ 



Houghton, 98 Ind. 149; s. c, 53 Am. 
Rep. 514; Supreme Lodge Knights of 
Pythias v. Schmidt, 98 Ind. 374; Bauer 
V. Samson Lodge, 103 Ind. 263; Su- 
preme Commandery Knights of the 
Golden Rule v. Ainsworth, 71 Ala. 443; 
s. c, 46 Am. Rep. 333. 

1. In Com. V. Wetherbee, supra, a 
contract had been made between the 
Connecticut Mutual Benefit Company 
and each of its members, and certifi- 
cates of membership issued according 
to its charter, the consideration being 
assessments to be paid from time 'to 
time as levied by the managing agents. 
The court held that the contract did 
not differ in any essential particular of 
form or substance from an ordinary 
policy of mutual life insurance, and 
said : "The contract made between the . 
Connecticut Mutual Benefit Companj- 
and each of its members, by the certifi- 
cates of membership issued according 
to its charter, does not differ in any 
essential particular of form or sub- 
stance from an ordinary' policy of mut- 
ual life insurance. The subject in- 
sured is the life of the member. The 
risk insured is death from any cause 
not excepted in the terms of the con- 
tract. The assured pays a sura fixed 
by the directors and not exceeding $10 
at the inception of the contract, and 
assessments of two dollars each an- 
nually, and of one dollar each upon the 
death of any member of the division to 
which he belongs during the contin- 
uance of the risk. In case of the death 
of the assured by a peril insured 
against, the company absolutely prom- 
ises to pay to his representatives, in 
sixty days after receiving satisfactory 
notice and proof of his death, "as many 
dollars as there are members in the 
same division, the number of which is 
limited to five thousand. The payment 
of this sum is subject to no contingency 
but the insolvency of the corporation. 
The means of paying it are derived 

29 



from the assessments collected upon 
his death from other menlbers; from 
the money received upon issuing other 
certificates of membership, which the 
by-laws declare may, after payment of 
expenses, be "used to cover losses 
caused by the delinquencies of mem- 
bers;" and from the guarantee fund of 
one thousand dollars, established by 
the corporation under its charter." 

A leading case on this subject is that 
of Farmer v. The State, 67 Tex. 561. 
A corporation had been organized un- 
der the name of the Masonic Mutual 
Benevolent Association of Texas, to 
provide for its members during life 
and their families after death, and pro- 
vided in its constitution and by-laws to 
pay to members at death a certain sum 
in consideration of membership fee and 
future assessments. An examination 
as to health and physical condition by 
a physician was required before admis- 
sion. It was held that the objects of the 
association were not benevolent, but 
that the consideration for the contracts 
between the members and the corpora- 
tion was mutual profit; that it was an 
insurance company and amenable to all 
the provisions of Rev. St. Tex., tit. 20, 
relating to such companies. The ap- 
pellants contended that a subsequent 
act of the legislature recognized the 
association as benevolent, and that it 
had made reports as required bj- the 
statute concerning such associations. 
The court said: "The evil the statute 
intended to remedy was the conducting 
of an insurance company for the profit 
of its officers, under the guise of benev- 
olence and in evasion of the insurance 
laws. The statute recognizes the exist- 
ence of mutual benefit societies claim- 
ing to be benevolent. It proposes to 
test whether they are really so, or car- 
ried on for the profit of their officers. 
It gives them an opportunity of estab- 
lishing their benevolent nature by re- 
porting certain named facts from which 



Ceitificates of 



MUTUAL INSURANCE. 



membership. 



The authorities are not uniformly clear as to where the terms 
of such contracts are to be found. Some of the courts say in the 
contract of membership itself ; others, that it is in the constitu- 
tion, by-laws, etc., of the organization. It is probably correct to 
say that it is in both and all.^ 

As contracts, they present no extraordinary features, nor do 
they call upon the courts for a difficult task of construction in 
and of themselves, however much the question may be compli- 
cated by the necessity of examining and interpreting provisions 



this question can be determined. If 
they fail to make the report, the pre- 
sumption is conclusive that it would 
disclose their object and effect to be the 
emolument of their officers by means 
of a life insurance business. If the re- 
port showed this to be their true char- 
acter, they were not to be exempted 
from the burdens imposed on other in- 
surance companies. There was not 
such virtue in the report itself as would 
shield the society from the conse- 
quences of an act against which the 
statute was attempting to provide. If 
the report upon its face showed that the 
purpose of the organization was benev- 
olent, no conclusive presumption to 
that effiict was established. The soci- 
ety could not protect itself by incorrect 
statements. The State had the best 
means it could suggest to call to ac-- 
count such corporations as were flying 
the flag of benevolence and yet doing 
business for the benefit of its officers. 
If this failed to disclose their true char- 
acter, it did not intend to deprive itself 
of all power to ascertain that character 
by other appropriate evidence to allow 
violators of the law to escape upon 
their own statement of their innocence." 
In Bolton v. Bolton, 73 Me. 299, the 
subject underwent thorough investiga- 
tion, and an institution with purposes 
similar to the above was held to be a 
mutual life insurance company. In 
State V. Critchett, 37 Minn. 13, the Su- 
preme Court of Minnesota held that a 
company, formed by married men with 
the purpose of endowing the wife of 
each member upon marriage with a 
sum of money equal to the then num- 
ber of members, was not a benevolent 
association. The court said: "The 
members paid a quid pro quo, and did 
not receive their money as an act of 
benevolence on the part of their fellow 
members." See also State v. Farmers' 
etc. Benevolent Assoc, 18 Neb. 281; 
Com. V. Wetherbee, 101; Mass. 149; 
May Ins. 550; State v. Citizens' Ben. 



30 



Assoc, 6 Mo. App. 163; State v. Mer- 
chants' Exchange etc. Soc, 72 Mo. 
146; People V. Nelson, 46-N. Y. 477; 
State V. Standard L. Assoc, 38 Ohio 
St. 281. 

The attempts of individuals to-asso- 
ciate themselves together, either in a 
corporate capacity or otherwise and 
obtain the benefits of insurance, and at 
the same time escape the burdens and 
duties imposed upon insurance com- 
panies, have led to the prosecution of 
actions quo luarranto as a result of 
which they have been in several in- 
stances declared to be mutual insur- 
ance companies and their charters held 
forfeited ' to the State, for noncom- 
pliance with conditions imposed by 
statute upon insurance companies 
organized and conducted for profit. 

The expositions given in the cases 
just cited, furnish a safe guide to the 
distinction between benevolent associa- 
tions proper and those which are so in 
name only but really mutual insurance 
companies. 

1. In Hellenberg -v. District No. i of 
I. O. O. B., 94 N. Y. 580, the court 
said: "The charter and Ijylaws of the 
corporation constitute the terms of an 
executory contract, to which the testa- 
tor assented when he accepted admis- 
sion into the order." In a similar case 
in Wisconsin the court said: "The con- 
stitution and by-laws certainly contain 
the contract which was entered into bj' 
the parties." 

"The contract is contained in the cer- 
tificates." Schunck V. Gegenseitiger 
etc. Fund, 44 Wis. 375. 

The correct principle is thus stated, 
"The charter, b^'-laws and certificates 
of membership taken together show 
what was the understanding of the 
parties." Worley v. Northwestern 
Masonic Aid Assoc, 10 Fed. Rep. 228; 
Presbyterial Mut. Assurance Fund v. 
Allen, 106 Ind. 593. For other decla- 
rations oh this point, see Masonic Mut. 
Ben. Soc. v. Burkhart, no Ind. 192; 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



of the charter and by-laws which, as has been stated, enter into 
and form a part- of such contracts. The primary rule is that the 
intent of the legislature and of the parties to the contract or 
designation must be first ascertained and then given effect.^ 

The consideration of the contracts of benevolent associations 
consists in the assessments and dues paid, which answer the same 
purpose as premiurris paid by the insured to other companies. 
The same conditions and provisions with respect to forfeiture of 
rights for nonpayment are usually provided for in these con- 
tracts as in ordinary policies of insurance.^ The provisions of the 
certificate with respect to the payment of the sum therein stipu- 
lated for must be substantially complied with. Such a contract 
is not one of insurance for a single year with the privilege of re- 
newal from year to year by paying the periodical dues and as- 
sessments, but it is 'an entire contract of assurance for life, sub- 
ject to discontinuance and forfeiture for nonpayment.^ 

In a mutual insurance company membership dates from the 
consummation of a contract and not before.* During negotia- 



Dolan V. Court of Good Samaritan, 
128 Mass. 437; Van Bibber v. Van Bib- 
ber, 82 K-y. 350; Splawn v. Chew, 60 
Tex. 535; Eastman v. Provident Mut. 
Relief Assoc. (N. H. 18S3), 20 Cent. 
L. J. 266. 

1. Bishop on Con., § 380; 2 Pars, on 
Con., p *4g4; i Redf. on Wills, p. *433 
and vol. 2, p. *2o. 

The whole of the statute, law, con- 
tract or designatorj writing must be 
looked at and considered. ■The courts 
are uniform in holding that the rules 
and regulations of benefit societies are 
to beconstrued liberallywhen resorted to 
for the. purpose of effecting benevolent 
objects. Supreme Council American 
Legion of Honors. Perry, 140 Mass. 580, 
589; Supreme Lodge Knights of Honor 
V. Martin (Pa.), 12 Ins. L. J. 628; 13 W. 
N. C. (Pa.) 160; Maneelj v. Knights 
of Birmingham, 115 Pa. St. 306; Erd- 
mann v. Mutual Ins. Co., 44 Wis. 376; 
Ballou V. Gile, 50 Wis. 614; Supreme 
Lodge Knights of Pythias v. Schmidt, 
98 Ind. 381; Gundlach v. Germania 
Mechanics' Assoc, 4 Hun (N. Y.) 339; 
Expressman's Aid Assoc, -v. Lewis, 9 
Mo. App. 412; Whitehurst w. White- 
hurst, 83 Va. 153; Masonic Mut. Re- 
lief Assoc, t'. McAuley, 2 Mackey (D. 
C.) 70; Duvall V. Goodson, 79 Ky. 224; 
Van Bibber.t;. Van Bibber, 82 Ky. 347; 
Massey v. Mutual Relief Assoc, 102 
N. Y. 523; Dietrich v. Madison Relief 
Assoc, 45 Wis. 79. 

2. The payment of the premium in 
one case and of assessments in the 



31 



other, operates merely' to continue the 
old contract. Mutual Ben. L. Ins. Co. 
V. Robertson, 59 111. 123; =>. c, 14 Am. 
Rep. 8. But the nonpayment of assess- 
ments will not forfeit the rights of the 
member under the certificate unless so 
provided. American Ins. Co. v. Klink, 
65 Mo. 78; Woodfin V. Asheville Mut. 
Ins. Co., 6 Jones L. (X. Car.) 558. 

3. Worthington v. Charter Oak Life 
Ins. Co., 41 Conn. 399; New York L. 
Ins. Co. V. Statham, 93 U. S. 24. 

Acts i8th Gen. Assem. Iowa, ch. 211, 
(j 2, providing that an omission to at- 
tach to insurance policies the applica- 
tions and representations upon which 
thej- are issued shall not invalidate 
the policy, but merely preclude the 
company' from pleading or proving the 
falsity of such representations, is appli- 
cable to the policies of mutual benefit 
associations. McConnell v. Iowa Mut. 
Aid Assoc. (Iowa), 43 N. W. 188. 

A condition in a policy of a mutual 
insurance company-, that "when a note 
is taken for the cash premium, if it is 
not paid within sixty da.ys after due, all 
obligations of the company to the in- 
sured, until such note is paid, are sus- 
pended," held valid. Joliffe v. The 
Madison Mut. Ins. Co., 39 Wis. iii; 
s. c, 20 Am. Rep. 35. 

4. Eilenberger ti. Protective Mut. F. 
Ins. Co., 89 Pa. St. 464. 

A person who had presented to and 
was accepted by a mutual life insurance 
company his application for member- 
ship, and premium note properly signed, 



Certificates of 



MUTUAL INSURANCE. 



Kembership, 



tions for insurance, a mutual company occupies no other or better 
position than one organized on the stock plan,. and cannot profit 
by the fraud of its agent ; for the membership arises from but does 
not precede the contract.^ As to all preliminary negotiations, 
the agent acts only on behalf of the company. 

Where the insured surrenders his policy, and it is agreed by the 
company that it shall be cancelled, the insured, from that time, 
ceases to be a member, and, although liable to assessments, which 
accrued while he was a member, is not liable for debts contracted 
after the surrender of his policy.^ 

It is often necessary to keep in view the fact that, though the 
contract of membership embodies the contract of insurance, the 
latter is in effect a distinct and independent matter. 

When mutual contracts are independent, the neglect of one 
party to perform will not absolve the other party from peform- 
ance. A contract, made by a mutual insurance conipany with 
one of its members, is equally binding as if made with a stranger.* 

In the absence of statutory restrictions, minors are not ineligi- 
ble to membership in mutual benefit societies. The objection 



is a member, notwithstanding the direct- 
ors have not formallj and olficially ac- 
cepted such application. Van Slyke v. 
Trempealeau etc. Ins. Co., 48 Wis. 683; 
Susquehanna Ins. Co. v. Perrine, 7 W. 
& S. (Pa.) 348; Eilenberger v. Pro- 
tective Mut. F. Ins. Co., 89 Pa. St. 464; 
Cumberland Valley Mut. Protective 
Co. V. Schell, 29 Pa. St. 31; Noyes v. 
Phoenix Mut. L. Ins. Co., i Mo. App. 

584- 

A person who has neither taken a 
policy in a mutual fire insurance com- 
pany, nor signed an application, nor 
paid a premium, is not a member, and 
in case of the insolvency of the com- 
pany is not liable to assessment. Com. 
V. Massachusetts Mut. F. Ins. Co., 112 
Mass. 116. 

Where the execution and delivery of 
a deposit note for premiums was made 
a condition precedent to membership, 
and it was further provided in the 
charter that no one could be insured by 
the company except members, it was 
held that to constitute one a member 
for purposes of insurance he must place 
himself in sush a position that only the 
fault of the company prevents his be- 
coming a member. Belleville Mut. Ins. 
Co. V. Van Winkle, 12 N. J. Eq. 333. 

1. As to fraud inducing the execu- 
tion of the policy or certificate of mem- 
bership, see Salmon v. Richardson, 30 
Conn. 360; s. c, 79 Am. Dec. 255; Jones 
V. Dana, 24 Barb. (N. Y.) 395; Deven- 
dorf t>. Beardsley, 23 Barb. (N. Y.)656; 



Brown v. Donnell, 49 Me. 421; s. c, 77 
Am. Dec. 266; Fogg v. Griffin, 2 Allen 
(Mass.) i; Sterling t;. Merchants' Mut. 
Ins. Co., 32 Pa. St. 75; s. c, 72 Am. 
Dec. 773. 

2. Akers v. Hite, 94 Pa. St. 394; s. c, 
39 Am. Rep. 792. 

Notwithstanding a clause in the char- 
ter of a mutual insurance company de- 
claring that all persons who shall in- 
sure with the company, and their heirs, 
etc., "so long as thej' shall be insured in 
said company, shall be and continue 
members thereof, and no longer," per- 
sons are still members of the company, 
and liable to contribute for the losses 
sustained, although they have alienated 
the property without the written con- 
sent of the company. Hyatt v. Wait, 
37 Barb. (N. Y.) 29. 

3. New England Mut. F. Ins. Co. v. 
Butler, 34 Me. 451. In Hays v. Ly- 
coming F. Ins. Co., 98 Pa. St. 184, 
in reversing the judgment of the in- 
ferior tribunal, the court said: "The 
mistake made in the court below was 
in treating the case as though the 
plaintiif was a member of the company, 
whereas it had nothing more to do with 
the company than has one who is in- 
sured in a joint stock association to do 
with the affairs of such association. He 
is therein interested to the amount of 
his insurance and no further. If he 
meets with a loss he requires payment, 
but he can require nothing more, and It 
is none of his concern how the monej' 



32 



Certificates of MUTUAL INSURANCE. Membership. 

that an infant can avoid his contract is not important, as adult 
members may do the like without incurring liability.^ 

2. Whole Term Life Certificates. — In mutual, as in other com- 
panies, the contracts of insurance are made to cover either the 
whole period of life or a shorter term. In life, or, as they are 
called, whole term policies, the agreement may be to pay a sum 
certain or a given sum for each solvent member holding unfor- 
feited contracts at the date of death of the insured. Sometimes 
dividends are provided for to be applied in reduction of assess- 
ments, but this provision is seldom made in the contracts of 
strictly mutual benefit societies, where there are no stockholders. 
The practice of allowing dividends as a rebate is confined to cer- 
tain companies, which combine the features of mutual benefit 
with capital stock, 

3. Endowment. — Many benefit associations, especially those or- 
ganized for the sole or main purpose of paying benefits and death 
losses, issue endowment as well as whole term certificates, thus 
further imitating the methods of regular or " old style "insurance. 
In endowment certificates the stipulated sum is payable to the 
insured if he should survive a certain period, or attain a specified 
age, and if he die before the expiration of the specified period, 
the payment to be made to his representatives or to a person des- 
ignated.* There are two kinds of endowment certificates. First, 
where the sum specified becomes payable only if death should oc- 
cur during the time specified in the policy. The insurance may 
be upon one or more lives, payable at the termination of one or of 
both ; or, if one should terminate before the other, to the survivor. 
Second, where the sum is payable at the death of the insured, if 
that should occur before the death of another person named in 
the certificate, but not otherwise. Should such other person die 
before the insured, the transaction fails. Endowment certificates 
are contracts of life insurance as much as if they covered the 
whole terms.* 

is raised by which he is paid. If pay- fit certificate of life insurance is jiot 

ment is refused he must pursue his ordi- forfeited for the nonpayment of the 

nary legal remedies, and to him at- local lodge dues until the member is 

taches none of either the rights or dis- more than six months "in arrears" for 

abilities of membership." the dues. Wiggin v. Knights of Py- 

1. Chicago Mut. L. etc Assoc, v. thias, 31 Fed. Rep. 122. 

Hunt, 127 111. 257. 3. Briggs v. McCuUough, 36 Cal. 550; 

In the same case it was held not to Carter v. John Hancock Mut. Fishing ' 

be a valid objection to minors as mem- Ins. Co., 127 Mass. 153; Endowment 

hers that they could not act as trustees, & Ben. Assoc, ly. State, 35 Kan. 262; 

because of their immaturity of judg-, Goodman w. Jedidjah Lodge,67 Md. 117. 

ment. The same objection would hold Where a lodge had issued endowment 

against many adult members, yet their certificates to each member, which enti- 

lack of intelligence or business experi- tied his wife and children, or other bene- 

ence would be no reason for excluding ficiary whom he might name, to $1,000 

them from membership. Id. upon his death, it was held that such 

2. According to article 11, section 1, certificates are in all essentials insurance 
of the constitution of the endowment policies, and the courts will adjudicate 
rank of the Knights of Pythias, a bene- the rights of the members, in reference 

16 C. of L.— 3 33 



Certificates of MUTUAL INSURANCE. Membership. 

4. Fire Policies. — The charter, the policy issued by the com- 
pany, and the conditions annexed thereto govern the rights and 
duties of the parties in a mutual fire insurance company, and 
must be read together. The main distinguishing feature of a fire 
policy is in the matter of assignability and the effect upon the con- 
tract of insurance of an alienation of the property covered. In 
this respect the result of all the authorities may be thus stated : 
I. That a sale of the property covered cannot take place without 
the consent of the company.^ 2. That the purchaser must be 
one whose purchase has been made with the consent of the com- 
pany, or has been ratified and approved by it. 3. That the pur- 
chaser must be a different person from -the parties insured, or 
either of them. In other words, the same must be to a third per- 
son, and not to one of the assured. The entire interest must be 
transferred to some one who was not interested in it previously. 
4. That the assured cannot terminate his membership in the com- 
pany, nor be released from the obligations of the premium note, 
without paying up all arrears of assessments for losses previously 
incurred.* 

Interest in the property insured is an essential link in the rela- 
tion of insurance, and the fact that a premium note has been exe- 
cuted as a means of securing the payment of losses during his 
membership, does not alter the case so as to make the vendor lia- 
ble to assessments with which to pay the loss by fire of the prop- 
erty sold.3 

5. Extent and Nature of Liability. — The liability assumed by the 
parties to a certificate of membership and insurance in a benefit 
assessment association may be of such extent and nature as they 
choose to make it, provided it be within the chartered powers of 

to such certificates, upon the same prin- to the benefit of the insurance, is liable 

ciples as apply to insurance companies, to assessment in case of the companj-'s 

Goodman v. Jedidjah Lodge, 67 Md. insolvency. Cora. v. Massachusetts 

117. Mut. F. Ins. Co., 112 Mass. 116. 

1. H/attf. Wait, 37Barb. (N.Y.)29. 2. Hyatt v. Wait, 37 Barb. <N. Y.) 

The contract of insurance is a per- 29. The maker of a premium note 

sonal contract with the assured, and the given to a mutual insurance company 

policy does not pass so as to continue for the nominal premium upon an open 

the liability of the company to an as- policy executed to cover such risks as 

signee or purchaser of the property in- may be afterv?ards endorsed thereon, is 

sured, unless by the consent of the un- liable to the company on such note only 

derwriters, or the properly authorized to the amount of the actual premiums 

officer or board of the association, upon risks assumed by the company and 

Simeral v. Dubuque Mut. F. Ins. Co., 18 endorsed thereon. Maine Mut. M. Ins. 

Iowa 319. Co. t;. Stockwell, 67 Me. 382; Elwell t). 

If the by-law's, charter or rules and Crocker, 4 Bos w. (N.Y.) 22; Lawrence 

regulations of the company printed on v. McCready, 6 Bosw. (N. Y.) 329; 

the policy require a specified method of Brower v. Hill, i Sandf. (N. Y.) 629. 
making assignments, those not made in 3. Wilson v. Trumbull Mut. F. Ins. 

substantial compliance therewith are Co., 19 Pa. St., 372; Indiana Mut. F. Ins. 

not binding on the company. Curaings Co. i). Conner, 5 Ind. 170; Tuckerman 

V. Sawyer, 117 Mass. 30. v. Bigler, 46 Barb. (N. Y.) 375; Smith 

An assignee of a policy in a mutual v. Saratoga Co. Mut. F. Ins. Co., 3 Hill 

fire insurance company, who is entitled (N. Y.) 500. 

34 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



the association, or law under which the articles are filed, and not 
prohibited by law. The amount to be paid upon the happening 
of the event insured against may be definitely fixed in the con- 
tract, or it may be left exclusively to the provisions of the by- 
laws, as already adopted or to be thereafter enacted, or it may 
be specified in the certificate, with a reference to existing by-laws. 
Again, instead of a specified sum, the association may, and often 
does assume an indefinite liability as to the payment of the pro- 
ceeds of an assessment of a certain amount upon each member.^ 
On the other hand, the obligations of the certificate holder may 
be equally indefinite. Sometimes it is stipulated that the assess- 
ments shall not exceed a certain sum, which may either be 
evidenced by a written obligation, called a premium note, or men- 
tioned in the certificate.''* 

In other cases the agreement by the member in his application 
may be simply to pay such assessments as the association or the 
directors see fit to make from time to time. Inasmuch as 
this power is conferred by the by-laws, which are subject to 
change at the will of the majority of the board of directors, there 
cannot in such case be said to be any contract of insurance out- 
side the contract of membership, since the liability of the mem- 
ber upon the latter is unlimited during its continuance.^ It is im- 



1. In the absence of any by-laws to endowment period. It was held that 

the contrary, the liability of a mutual in the event of the death of a member, 

company is for the total loss, not to ex- the association was liable to pay a sum 

ceed the amount of the policy, and is equal to $1.50 for each certificate in 

not limited to the amount derived from force and no . more, where there were 

an assessment. Id. Harl v. Pottawat- no moneys in the assessment fund ap- 

tomie Co. Mut. F. Ins. Co , 74 Iowa plicable to such claims. Kerr v. Min- 

39; La Manna v. National Security L. nesota Mut. Ben. Assoc, 39 Minn. 174- 



& Ace. Co., 10 N. Y. Supp. 221. 

An association was bound by its con- 
stitution and by-laws to pay an amount 
equal to $1.50 for each certificate in 
force at the time payment became due, 
not to exceed $4,000. It was also re- 
quired to pay the full amount of its cer- 
tificates at maturity, provided there 
were sufBcient moneys in the fund from 
which they should become payable; 
and provided, further, that such money 
should be applied proportionately to all 
certificates becoming payable the same 
quarter. The $4,000 was termed an 
endowment, and the period in which it 



2. See Premium Notes, 111,6, /«y>-a. 

3 Mulroy v. Knights of Honor, 28. 
Mo. App. 463; Maryland Mut. Ben. 
Assoc. V. Clendinen, 44 Md. 429; s. c, 
22 Am. Rep. 52; Miner v. Michigan 
Mut. Ben. Assoc, 63 Mich. 338; Bur- 
bank V. Rockingham Ins. Co., 24 N. H. 
550; i;7 Am. l5ec. 300; Susquehanna 
etc. Ins. Co. v. Perrine, 7 W. & S. (Pa.) 
348; Grand Lodge v. Eisner, 26 Mo. 
App. 109; McMurry t;. Supreme Lodge 
Knights of Honor, 20 Fed. Rep. 107; 
Mitchell V. Lycoming Mut. Ins. Co., 51 
Pa. St. 402; Simeral t;. Dubuque Mut. 
F. Ins. Co., 18 Iowa 319; National Ben. 



became due, an endowment period. . Assoc, v. Bowman, no Ind. 355; Ma- 



Assessments were both regular and 
special, and it was provided that they 
should be made by the directors. The 
association was also required to main- 
tain two funds; one an endowment 
fund, out of which the endowments 



sonic Mut. Relief Assoc, v. McAuley, 2 
Mackey (D. C.) 70. 

In Fugure v. Mutual Soc. of St. 
Joseph, 46 Vt. 362, a husband had be- 
come a member in 1862. At that time 
the by-laws of defendant society pro- 



were payable; the other, an assessment vided that each member' paying the 
fund, out of which beneficiaries were regular assessment, should "be entitled 
paid in case members died within the to twenty-five cents per day during 

35 



Certificates of 



MUTUAL INSURANCE. 



Uembership. 



material whether the by-laws, or the right to change them, be men- 
tioned in the certificate or not. 

Where the terms of the certificate are in conflict with the pro- 
visions of the by-laws, with respect to the member's liability, the 
former will prevail if not opposed to the organic law under which 
the association is created.^ 

It has been held that, without an assessment, members are lia- 
ble for sick and funeral benefits due by a voluntary association.* 

But the better and prevailing view is that under the constitu- 
tion and by-laws, the credit is given, not to the members, but to a 



their sickness;" and "to the widow of 
each member deceased, so long as she 
shall remain a widow, and shall enjoy a 
good reputation, twenty-five cents per 
day." It was further provided that, "so 
long as there shall be twenty dollars in 
the treasury the society cannot reduce 
its aid to the sick." There was also a 
special provision for the manner of al- 
tering or changing the by-laws; and 
there is also a provision in the charter 
that the society may alter or change its 
by-laws. In August, 1869, the defend- 
ant corporation adopted a set of by-laws 
which provided that such widows shall 
receive twenty-five cents per day "until 
she had received $200." The plaintiff' 
has received $200, in accordance with 
the latter by-law of the society. The 
court said: "It is insisted that a right 
had become vested in the plaintiff (her 
husband died Jan. 5th, 1869) to have 
and receive of the defendant twenty- 
five cents per day during her widow- 
hood, and that it was not competent for 
the defendant to diminish it. The means 
of making these contributions to the 
sick and the widows of deceased mem- 
bers were derived solely from volun- 
tary assessments upon the members of 
the society and must be graduated by 
such assessments. And experience 
might prove that, without assessments 
greater than the members could bear, 
there must be a limitation to the stipend 
to widows. Prevailing sickness among 
the members may have so exhausted 
the means of the society that the pro- 
vision for widows must necessarily be 
modified, or it could not discharge the 
duties for which it was formed. It 
must be incident to the very nature and 
purpose of such an association, that it 
should have power to modify and 
change its by-laws so as to graduate 
its charities as experience and necessity 
may require. It cannot, indeed, per- 
vert its contributions to subserve other 



36 



ends and purposes; but the society may 
regulate the manner in which they shall 
carry out the purposes for which they 
associated." See also Supreme Com- 
mandery Knights of the Golden Rule 
V. Ainsworth, 71 Ala. 449; s. c, 46 Am. 
Rep. 332; Bigelow v. Berkshire L. Ins. 
Co., 93 U. S. 2S4; Korn 'v. Mutual 
Assoc. Soc, 6 Cranch 396. Compare 
Poultney -v. Bachman, 62 How. Pr. 
(N. Y.) 466; Gundlach v. Germania 
Merchants' Assoc, 4 Hun (N. Y.) 
341; Pellazzino v. German etc. Soc, 16 
Cin. L. Bui. 27. 

1. Thus it was held that a provision 
in a certificate of membership, in a mu- 
tual life association, evidently contem- 
plating a mortuary assessment to meet 
each death loss, would prevail over a 
clause of the by-laws of the association 
tending to limit the number and amount 
of assessments to be levied, inconsist- 
ent therewith, though the application 
stipulates that the by-laws should be 
part of the contract. Fitzgerald v. 
Equitable Reserve Fund Life Assoc, 3 
N. Y. St. Rep. 214; Davidson v. 
Old People's etc. Soc, 39 Minn. 
303: 25 Am. & Eng. Corp. Cas. 
601. 

Where the act incorporating a mutual 
insurance company, provided that all 
persons who should insure with the 
corporation "should thereby become 
members thereof during the period they 
should remain so insured and no longer," 
it was held that, under this provision, 
membership continued during the entire 
term of the policy, though the property 
insured was destroyed before that term 
expired, and that, during the life of the 
policy, the insured was liable to assess- 
ment on his premium note, notwith- 
standing the destruction. Bangs v. 
Skidmore, 24 Barb. (N. Y.) 29; aff'd 21 
N. Y. 134. See contra. 

2. Pritchett v. Shaefer, 2 W. N. C. 
(Pa.) 317. 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



fund belonging to the collective, body and created by joint con- 
tributions of the members.^ 

Members are, of course, not liable to assessments for losses and 
benefits which occurred prior to or after the making of such con- 
tracts. And though in most associations the termination or con- 
tinuance of his relation is optional, still the certificate furnishes 
sufficient consideration for his agreement to pay any and all as- 
sessments made during the existence of the connection.** And 
this liability continues, although, in the mean time, the insolvency 
of the society has been decreed.^ 

6. Premium Notes. — The practice of evidencing and limiting the 
liability to assessment is not ordinarily, or often, a feature of bene- 
fit societies proper. It rather pertains to the business done by stock 
companies, which insure their shareholders on the mutual plan ; 
especially to fire companies. However, premium notes may be, 



1. Payne v. Snow, 12 Cush. (Mass.) 
443; s. c, 59 Am. Dec. 203. 

With respect to obligations and debts 
.of a voluntary organization to others 
than members, such liabilities are not 
incurred bj an individual member ex- 
cept by his own acts. None arises from 
the contract of.membership unless im- 
■ posed by statute. Bacon Ben. Soc. and 
Ins. 116. 

It is often provided by statute, how- 
ever, that members of voluntary associ- 
ations, and all corporations not having 
a capital stock, shall be liable to credit- 
ors, jointly and severally, to the full 
amount of all indebtedness. 

2. Columbia F. Ins. Co. v. Kinyon, 37 
N.J L. 33; Farmers' Mut. F. Ins. Co. 
V. Chase, 56 N. H. 341; State v. Mon- 
itor F. Assoc, 42 Ohio St. 555; Mc- 
Donald V. Ross-Lewin, 29 Hun (N. Y.) 
S7; Stewart v. Northampton etc. Ins. 
Co., 38 N. J. L. 436; Planters' Ins. Co. 
V. Comfort, 50 Miss. 662; Tolford v. 
Church, 66 Mich. 431. 

The liability of members of mutual 
insurance companies extends to all debts 
and obligations contracted while the 
contract of membership remains in 
force. Van Buren v. St. Joseph etc. Ins. 
Co., 28 Mich. 398; Commonwealth v. 
Massachusetts Mut . F. Ins. Co., 112 
Mass. 116; Orr v. Mercer Co. Mut. F. 
Ins. Co., 114 Pa. St. 387. 

But members are not liable for losses 
or other liabilities occurring before the 
beginning or after the termination of 
the contract of membership. Akers ti. 
Hite, 94 Pa. St. 394; s. c, 39 Am. Dec. 
792; Manlove v. Naw, -^ Ind. 289; 
Manlove w. Bender, 39 Ind. 371; s. c, 13 
Am. Rep. 280. 



Unearned premiums do not come 
within the meaning of the Massachu- 
setts statutes, imposing a personal lia- 
bility upon members of mutual insur- 
ance companies. It is a condition to 
such statutory liability that the amount 
due upon premium notes shall be first 
exhausted. Cora. v. Monitor Mut. F. 
Ins. Co., 112 Mass. 150. 

The liability to assessment of a policy 
holder in a mutual fire insurance com- 
pany is not in accordance with the pro- 
portion of the expired to the unexpired 
term of the policy, but in accordance 
with the liabilities of the company. 
Com. V. Massachusetts Mut. F. Ins. 
Co., 112 Mass. 116. Held'va the same 
case that a policy holder in a mutual 
fire insurance company is liable to as- 
sessment while his policy remains un- 
cancelled, although he has had no insur- 
able interest under, or right to recover 
upon, the policy. 

The insured of a mutual insurance 
company are not liable to paj' losses or 
expenses that occurred prior to the date 
when they became members of said 
company. Peoples' F. Ins. Co. v. Hart- 
shorne, 90 Pa. St. 465. 

3. Com. V. Massachusetts Mut. F. Ins. 
Co., 112 Mass. 116; 119 Mass. 45; Va- 
natta v. New Jersey Mut. L. Ins. Co., 
31 N. J. Eq. 15; Union Mut. F. Ins. Co. 
V. Spaulding, 61 Mich. 77. 

The by-laws of a benefit society- pro- 
vided that proofs of death should be 
made in a specified manner and laid be- 
fore the directors, who were given au- 
thority to make an assessment upon 
each of the class to which the deceased 
belonged. It was held that the assess- 
ment could be made only on those who 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



and sometimes are, employed by strictly mutual life and fire com- 
panies — principally by the latter.^ 

The premium note and policy, together, constitute the contract 
between the insurance company and the insured, and from them 
both the conditions of the agreement are to be ascertained.^ 

It is often provided in such cases, and policies of insurance ex- 
ecuted in connection therewith, that the time of payment of in- 
stalments, or even of interest, shall be of the very essence of the 
contract, and that the policy shall become void upon failure to 
make payment at the specified time. Such provisions are usu- 
ally held valid even in courts of equity.^ 

Upon a breach of such conditions the company may recover 
the full amount of the note, and not merely such part as would 
bear the same proportion to the full amount as that portion of 
the period of the risk, prior to the notice of default, bears to the 
entire period covered by the policy.^ 

Such failure does not absolutely avoid the policy, but suspends 
it, so that the company is not liable for a loss occurring during the 



were members of the class subject there- 
to at the time the resolution was adopt- 
ed. Miller v. Georgia Masonic Mut. L. 
Ins. Co., 67 Ga. 221. 

1. Whether the company has power 
to divide such notes into classes and 
separately assess them seems to be un- 
settled upon authority. Allen v. 
Winne, 15 Wis. 113. 

2. Shultz V. Hawkej'e Ins. Co., 43 
Iowa, 239. The parties usually have 
the same power to rescind it by mutual 
agreement as they had to make it. 
Akers v. Hitte, 94 Pa. St. 394; s. c, 39 
Am. Dec. 792. Comfare New Eng- 
land Mut. F. Ins. Co. V. Butler, 34 Me. 
451. And see American Ins. Co. v. 
Schmidt, 19 Iowa, 502, where it was 
held that with respect to a premium 
note, a member stands on a different 
footing to that assumed in his contract 
of membership; accordingly, he is not 
chargeable with notice of the acts and 
proceedings of the directors of the com- 
pany in a suit on a premium note, so as 
to deprive him of the benefit of any 
defence. 

The issuing of a policy of insurance 
b_v an insolvent insurance company is a 
good consideration for a promissory 
note given for the premium, if the in- 
solvency of the company was not known 
by its officers or agents at the time. 
Lester v. Webb, 5 Allen (Mass.) 

569- 

A mutual fire insurance company 
cannot maintain an action for the pre- 
mium and deposit note against a person 



on whose application they have made 
out a policy, at a rate of premium 
agreed upon, but who refuses, on re- 
quest, to take the policy or sign the de- 
posit note. Real Estate Mut. F. Ins. 
Co. V. Roessle, i Gray (Mass.) 336. 

3. Knickerbocker L. Ins. Co. v. Dietz, 
52 Md. 16; Patch V. Phcenix Mut. L. 
Ins. Co., 44 Vt. 487; Anderson -u. St. 
Louis Mut. L. Ins. Co., i Flip. (U. S.) 
559; Knickerbocker L. Ins. Co. v. Har- 
lan, 56 Miss. 512. 

It is competent for a mutual fire in- 
surance company, organized under the 
laws of this State, to provide in its ar- 
ticles of association, or by its by-laws, 
that all premium notes shall be paid in 
instalments as ordered by the directors, 
after notice, and that if not so paid, the 
entire notes shall become due and col- 
lectible. German Mut. F. Ins. Co. v. 
Franck, 22 Ind. 364. 

Upon payment of the full amount the 
insured becomes the owner of a paid-up 
policy for the remainder of the original 
term. American Ins. Co. v. Klink, 61; 
Mo. 78. 

4. American Ins. Co. v. Klink, 6c 
Mo. 78. 

A provision in the charter of a mutual 
fire insurance company, that, in case of 
default, to pay an assessment upon a de- 
posit note, "the directors may sue for 
and recover the full amount of said de- 
posit note," does not prevent the bring- 
ing of such an action in the name of 
the treasurer of the company, when the 
note is made payable "to said company 
38 



Certificates of 



MUTUAL INSURANCE. 



MembersMp. 



continuance of such default, but, upon the payment of the note 
(whether voluntary or enforced), the policy revives and reat- 
taches.^ 

An assessment, regularly made by the proper authority, is gen- 
erally a prerequisite to a right of action by the company on a 
premium note.^ 

The maker is liable to pay an assessment made upon his note 
to meet a deficiency in funds, caused by the inability of other 
members to pay the proportion of losses assessed upon their 
notes,^ which may be made on the whole amount of the note, 
although the promissor has an insurable interest in a part only of 
the property covered by the policy.* 

But the mere assessment of a premium note, after knowledge 
by the company of a breach of a condition, whereby the policy has 
become void, does not revive it, but is consistent with the right 



or their treasurer for thie time being." 
Jones V. Sisson, 6 Gray (Mass.) 288. 

1. American Ins. Co. v. Klink, 65 
Mo. 78. 

A policy of insurance stipulated that 
if the premium note was not paid with- 
in sixty days after maturity, and suit for 
its collection should be commenced, this 
would operate as an absolute cancella- 
tion of the policy, which would not be 
waived by the collection of the premium. 
It was held, that it was competent for 
the parties to stipulate for a termination 
of the company's liability upon a de- 
fault in payment of the premium, and 
that, accordingly, it was not liable for a 
loss suflFered by a policy holder after 
collection of the premium note by ac- 
tion at law. Shultz v. Hawkeye Ins. 
Co., 42 Iowa 239. 

A member of a mutual iire insurance 
compan3' is not discharged from his 
liability on his deposit note for losses 
already accrued, by the cancellation of 
his policy by a general corresponding 
agent of the company, accompanied by 
a promise to surrender the note, with- 
out proving the authority of such agent 
to surrender the note. Marblehead 
Mut. Fire Ins. Co. v. Underwood, 3 
Gray (Mass.) 210. 

2. A premium note payable "in such 
portions and at such times as the direct- 
ors of said company require," is no 
evidence of liability when not accom- 
panied by proof that the directors had 
made any assessment. Hagan v. Mer- 
chants' etc. Ins. Co. (Iowa), 46 N. W. 
Rep. 1 1 14. 

Where the charter provides that all 
assessments shall be determined by the 
directors, and lays down the rules by 



which the amount to be raised, and the 
manner it is to be apportioned are fixed, 
all that is necessary is, that the directors 
determine by vote that an assessment 
be made; and such vote is a sufficient 
requirement of a payment to be made 
on the premium note. Atlantic Mut. 
F. Ins. Co. V. Sanders, 36 N. H. 252. 

But where a note was given to an in- 
surance company, payable in such por- 
tions, and at such time or times as the 
directors may require, and a resolution 
of the directors assigned all the assets 
of the company, this note included, to 
the plaintiff in trust, that he should col- 
lect them to pay the debts of the com- 
pany, it was held that this was a suffi- 
cient requirement. Hill v. Reed, 16 
Barb. (N. Y.) 280. 

3. Bangs V. Gray, 12 N. Y. 477, re- 
versing Matter of Bangs, 15 Barb. 264; 
Osgood V. Strauss, 65 Barb. (N. Y.) 383. 

A maker of a premium note may be 
assessed for losses suffered by members 
who paid their premiums in cash in ad- 
vance. Jackson v. Roberts, 31 N. Y. 

304- 

The insured is entitled, however, to 
set-off for loss under the policy, where 
it is stipulated that the "loss shall be 
paid, the amount of the premium note 
being first deducted." Columbian Ins. 
Co. V. Bean, 113 Mass. 541. 

Nor can the liabilitj' of the members 
upon their deposit notes be increased 
by the fact that the company has be- 
come insolvent, and its effects are trans- 
ferred to a receiver. Shaughnessy v. 
Rensselaer Ins. Co., 21 Barb. (N. Y.) 
605. ' 

4. New England Mut. F. Ins. Co. v. 
Belknap, 9 Cush. (Mass.) 140. 



39 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



of the company to treat it as void, since the maker of such note 
is liable, at all events, for his proportion of losses occurring during 
his membership to the full amount of the note.* 

In case of alienation of the property covered by the policy, the 
insured will remain liable upon his deposit note, as well for losses 
occurring after as before the alienation, until all assessments are 
paid.* 

Premium notes are assignable in like manner and effect as other 
absolute written promises.^ 

7. Effect Upon Contract of Constitutions and By-laws. — All the con- 
tracts of an incorporated benefit society are made with reference 



Upon a recovery on a premium note 
for the nonpayment of assessments, 
the plaintiff is entitled to interest from 
the time when the assessments were 
payable. Hyatt v. Wait, 37 Barb. (N. 
Y.) 29. 

1. Huntley v. Beecher, 30 Barb. (N. 
Y.) 1580; Neely v. Onondaga Co. Mut. 
Ins. "Co., 7 Hill (N. Y.l 49; Hyatt v. 
Wait,' 37 Barb. (N. Y.) 29; Smith v. 
Saratoga Co. Mut. Ins. Co., 3 Hill (N. 
Y.) 508; Atlantic Ins. Co. v. Goodall, 
35 N. H. 328; Allen v. Vermont Mut. 
F. Ins. Co., 12 Vt. 366; Finley v. Ly- 
coming Co. Mut. Ins. Co., 30 Pa. St. 
311; s. c, 72 Am. Dec. 701;; Lyons v. 
Globe etc. Ins. Co. 28 U. C. C. P. 62. 
But see Millurd v. Supreme Council 
American Legion of Honor, Si Cal. 

34°- 

2. Hyatt v. Wait, 37 Barb. (N. Y.) 29. 

Where Policy Is Assigned. — A by-law 
of a town mutual insurance company, 
providing that "policies of insurance 
may be assigned with the consent of the 
president and secretary, the parties 
paying fifty cents recording fees, at the 
Same time giving his undertaking to 
the company', and the company will not 
hold itself responsible for loss on prop- 
erty so transferred until such assign- 
ment so made and undertaking given," 
does not apply to a case where property 
covered hy its policy is transferred, and 
the policyholder retains an insurable 
interest therein. Jerdee v. Cottage 
Grove F. Ins. Co. (Wis.), 44 N. W. 
Rep. 636. 

But it is otherwise and the company 

is bound if it has received notice of the 

. transfer, and made entry of the same 

on its books. Cumings v. Hildreth, 117 

Mass. 309. 

3. Howland v. Myer, 3 N. Y. 290; 
Furniss v. Gilchristj i Sandf (N. Y.) 
53; Brouwer v. Applebv, i Sandf (N. 
Y,) 158; Brouwer v. Hill i Sandf. (N. 



Y.) 629; Holbrook v. Basset, 5 Bosw. 
(N. Y.) 147; Brookman v. Metcalf, 5 
Bosw. (N. Y.) 429; Marine Bank v. 
Clements, 6 Bosw. (N. Y.) 166; Hope 
Mut. L. Ins. Co. V. Taylor, 2 Rob. (N. 
Y.) 278; Brookman v. Metcalf, 32 
N. Y.591; Sands c. Campbell, 31 N. 
Y. 345; Crooke v. Mali, 11 Barb. (N. 
Y.) 205; Hone v. Folger, i Sandf (N. 
Y.) 177; Hone v. Bullin, i Sandf. (N. 
Y.) 181; Merchants' Mut. Ins. Co. v. 
Rey, I Sandf (N. Y.) 184; Aspinwall 
V. Meyer, 2 Sandf (N. Y.) 180; Law- 
rence V. McCread}', 6 Bosw. (N. Y.) 
329; Chesbrough v. Wright, 4 Barb. 
(N. Y.) 28. 

A mutual insurance company took 
up a subscription, by which the sub- 
scribers agreed to give their notes for 
premiums in advance of insurance to 
be effected by them, the subscription 
not to be binding until the sum of $300,- 
000 was subscribed. That sum was in 
form subscribed, the defendants being 
subscribers, and the defendants volun- 
tarily gave their notes for the amount 
of their subscription. All parties acted in 
good faith, and without any fraud, mis- 
representation or concealment. Held. 
that such notes were, in the hands of 
the company, valid binding notes, which 
the company had a right to negotia'e 
for the purpose of paying claims or 
otherwise, in the course of its business, 
notwithstanding it ultimately appeared 
that some of the subscriptions were not 
valid binding subscriptions, and not- 
withstanding, if the notes had not been 
given, the defendants might have legally 
refused to give them on the ground that 
the condition of the subscription had 
not been in fact satisfied. Holbrook ij. 
Basset, 5 Bosw. (N. Y.) 147. 

Statute of Limitations. — Where an 

insurance note given prior to 1853 

was regularly assessed to its full 

amount, the time of payment fixed, 

40 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



to all the laws of the organization. These are' deemed part of 
each contract of membership, "whether mentioned or not, and are 
as binding upon all the members as provisions contained in the 
charter. 1 

Each member is conclusively presumed to know them, and will 
not be heard to plead ignorance of their provisions in any case.^ 

But this has no reference to mere regulations adopted by the of- 
ficers of the company in regard to the transaction of business, di- 
rections to agents and thelike, but rather to such rules as enter into 
the charter or by-laws of the company, whereby the liability and 
rights of its members are fixed.* 

All the essentials of valid by-laws in corporations generally 
must characterize those of incorporated benefit societies.* 



and notice of the assessment duly pub- 
lished, as required by the charter and 
the by-laws of the company, an action 
upon it is barred by the statute of limit- 
ations in six years from its maturity. 
Sands v. Lilienthal, 46 N. Y. 541. 

1. Supreme Lodge Knights of Pythias 
V. Knight, 117 Ind. 489; Slater Mut. F. 
In^. Co. V. Barstow, 8 R. I. 343; Com- 
monwealth V. Massachusetts Mut. F. 
Ins. Co., 112 Mass. 116; Com. x<. 
Dorchester Mut. Fire ■ Ins. Co. 113 
Mass. 142; Susquehanna Mut. Fire Ins. 
Co. V. Gackenbach, 115 Pa. St. 492; 
Pennsylvania Training School v. Inde- 
pendent Mut. F. Ins. Co.- (Pa.), 18 Atl. 
Rep. 392; Shay t;. National Ben. Soc, 
7 N. Y. S. Nat. Rep. 287; Sands v. 
Shoemaker, 4 Abb. App. Dec. (N. Y.) 
149; Planters' Ins. Co. v. Comfort, 50 
Miss. 62; Bersch v. Sinnissippi Ins. 
Co., 28 Ind. 64. See Kqehler v. Beeber, 
122 Pa. St. 291; Susquehanna Mut. F. 
■Ins. Co. V. Stouffer, 125 Pa. St. 416; 
Bogards v. Farmers' Mut. Ins. Co., 79 
Mich. 440; Mor. Priv. Corp., § 491. 

The construction placed upon the 
by-laws of a friendly order by its offi- 
cers and agents will not be heard in 
evidence to affect its construction by 
the court. Wiggin v. Knights of Pythias, 
31 Fed. Rep. 122. 

2. Pfister V. Gerwig, 122 Ind. 567; 
Bauer v. Samson Lodge, 102 Ind. 262; 
Mitchell V. Lycoming Mut. F. Ins. Co., 
51 Pa. St. 402; Coleman v. Knights of 
Honor, 18 Mo. App. 189; Coles v. 
Iowa State Mut. Ins. Co., 18 Iowa 
425; Simeral v. Dubuque Mut. F. Ins. 
Co., 18 Iowa 319; Fugure f. Mutual 
Soc. St. Joseph, 46 Vt. 368; People v. 
St. George Soc. 28 Mich, 261; Sperry's 
Appeal, 116 Pa. St. 391; Osceola Tribe 
V. Schmidt, 57 Md. 98; Coles v. Iowa 
State Mut. ' Ins. Co., 18 Iowa 425; 



Bellville Mut. Ins. Co. v. Van Winkle, 
12N.J. Eq. 335; Diehl T>. Adams Co. 
Mut. Ins. Co., 58 Pa. St. 443; ». c, 98 
Am. Dec. 302; Hanf v. Northwestern 
Masonic Aid Assoc. (Wis.), 45 N. W. 
Rep. 315; Turnbull v. Woolfe, 9 Jur., 
N. S. 57; II W. R. ss; 7 L. T., N. S. 
483; Fuller V. Madison Mut. Ins. Co.. 
36 Wis. 599; Treadway v. Hamilton 
Mut. Ins. Co., 29 Conn. 68; Oceanic 
etc. Assoc. V. Leslie, 22 Q. B. D. 722, 
United Kingdom etc. v. Nevill, 19 Q^ 
B. D. no; Great Britain etc. Assoc, v. 
Wyllie, C. A. 710. 

The rule that members are bound to 
take notice of by-laws applies; although 
it be required by statute that all con- 
ditions of the policy shall be printed 
upon its face. Com. v. Massachusetts 
Mut. F. Ins. Co., 112 Mass., 116. 

This presumption held applicable to 
an assignee of a policy who held the 
policy over eighteen months, during 
which time he had opportunity to know 
his rights and liabilities and the condi- 
tions upon which his rights could be 
made secure. Miller v. Hillsborough 
Mut. etc. Assoc, 42 N. J. Eq. 459. 
It was also held in this case that a mutual 
insurance company will not be de- 
prived of the benefit of a defence to an 
action on a policy afforded hy a condi- 
tion contained in a by-law, the by-laws 
being made part of the policy by the 
terms of the latter, because of the fraud 
of its officers in leading plaintiff to sup- 
pose that there was no such condition. 

3. Walsh V. Aetna Life Ins. Co.. 30 
Iowa 133; s. c, 6 Ara. Rep. 664. 

4. A provision of the constitution of 
a railroad relief association thati before 
the association will pay the beneficiary 
of the member killed, the amount of 
benefits due, the person legally entitled 
to damages for the death shall release 

41 



Certificates of 



MUTUAL INSURANCE. 



Membership. 



But while by-laws, duly enacted by a majority, are binding 
upon the members, they must conform to certain general re- 
quirements in respect to personal and property rights of mem- 
bers. There are many terms allowable and enforceable when found 
in a contract, which, if inserted in a by-law, would render it so far 
invalid. "A man may part with a common right voluntarily, of 
which it would be impolitic and unjust to deprive him by a by- 
law, passed without his assent, or, perhaps, knowledge, by those 
who would not consult his individual interests."-* 

The same objections will lie to by-laws of a voluntary associa- 
tion, which affect property or pecuniary interests, as to those of a 
corporation. The same general rules of law and equity, so far as 
regards the control of them, and the adjudication of their re- 
served and inherent powers to regulate the conduct and to expel 
their members, apply to them as to corporations and joint stock 
companies.^ 

But a distinction exists, with respect to by-laws, on the subject 



the railroad company from all claims 
for damages, was held not so un- 
reasonable as to be void. Fuller v. Bal- 
timore etc. Relief Assoc. (Md.), lo Atl. 
Rep. 237. And the same conclusion 
was reached in the case of a constitu- 
tion providing that "all claims against 
the association shall be referred to the 
board of directors, whose decision shall 
be final," and that "assessments shall 
not be made except on its authority." 
Rood v. Railway Passenger & Freight 
Conductors' Mut. Ben. Assoc, 31 F. 62. 

See By-Laws, 2 Am. & Eng. Encyc, 
of Law, 706. 

1. Ang. & Ames on Corp., § 342; 
Goddard- v. Merchants' Exchange, 78 
Mo. 609; 9 Mo. App. 290; Austin v. 
Searing, 16N. Y. 112; s.c, 69 Am. Dec. 
665. 

it has been held that, as between the 
members of a mutual insurance com- 
pany and the company itself, the terms 
of a premium note may be altered by 
a by-law made after the execution 
of the note. Mutual Ben. L. Ins. Co. 
V. Jarvis, 22 Conn. 133. 

Plaintiff agreed, in his application for 
fire insurance in a miitual insurance 
company, to be governed by all the 
conditions in the charter and b^'-laws, 
as they then existed, and any changes 
that might thereafter be made. And a 
change was afterwards made, the effect 
of which was to limit the risk on plain - 
tilFs property. Plaintiff received a 
copy of the new by-law, and made no 
objection, and continued his member- 
ship. It was held that he was bound 



by the new by-law. Borgards v. Farm- 
ers' Mut. Ins. Co., 79 Mich. 440. 

Where a certificate issued under said 
by-laws uses the words "act or occupa- 
tion classed as more hazardous" instead 
of the language of the by-law, but the 
classification made by the association 
is based on occupations and not on 
acts, the rights of the member are the 
same under the certificate as under the 
by-laws. Union Mut. Ace. Assoc', v. 
Frohard (111.), 25 N. E. Rep. 642. 

On the same principle where the 
terms of a policy are in conflict with a 
by-law of the society, it having power 
under its charter to issue such a policy, 
the society must be deemed to have 
waived the provisions of the by-law in 
favor of the assured. Davidson v. Old 
People's Mut. Ben. Soc, 39 Minn. 303. 

Though a by-law of an insurance 
company may provide that any of its 
polices upon property previously in- 
sured, shall be void, unless such pre- 
vious insurance be endorsed on the 
policy at the time of its being issued, 
still such by-law is inoperative, if, in 
the policy itself, such previous insur- 
ance be recognized and approved. 
Philbrook v. New England Mut. Fire 
Ins. Co., 37 Me. 137; New Hampshire 
F. Ins. Co. V. Rand, 24 N. H. 428; 
Shaughnessy v. Rensselaer Ins. Co., 
21 Barb. (N. Y.) 605; Great Falls Mut. 
F. Ins. Co. V. Harvey, 45 N. H. 292; 
American Ins. Co. v. Woodruff, 34 
Mich. 6; Planters' Ins. Co. v. Comfort, 
50 Miss. 662. 

2. Leech v. Harris, 2 Brewst. 571; 
42 



Certificates of 



MUTUAL INSURANCE. 



Membtirslilp. 



of expulsion of members. By-laws of corporations, having as 
their object the expulsion of members, must be reasonable, 
whether property rights are involved or not, while those of vol- 
untary associations not affecting property are binding, without 
regard to the question of reasonableness, if not otherwise objec- 
tionable. Courts will only enquire whether, in their adoption, 
the methods and formalities prescribed and agreed upon by the 
members themselves have been observed.^ 

The payment of sick benefits is a common feature of benefit so- 
cieties, and they are oftener provided for in the by-laws than in 
the certificates of membership. Especially does the last remark 
apply to the great fraternal bodies, including grand and subordi- 
nate lodges. In all cases which have arisen involving these bene- 
fits, it has been held that the laws of the society are to be consid- 
ered in determining the right, and they are to govern, unless con- 
trary to municipal law.* 

But a right to sick benefits may become vested, so that it may 
not be defeated by a change in -the by-law, under the provisions 
of which it was acquired. After the sickness of a member has be- 
gun, the contingency provided for in the contract entitling him 



Beaument v. Meredith, 3 Ves. & B. 
180; Otto V. Journeymen Tailor's etc. 
Union, 75 Cal. 30S; Babb v. Reed, 5 
Rawle 158; 28 Am. Dec. 650; Loubat 
V. Leroy, 15 Abb. N. C. i; Gorman v. 
Russell, 14 Cal. 531; Lindley on Par. 

1. Kehlenbeck v. Logeman, 10 Daly 
(N. Y.) 447; McDonald v. Ross-Lewin, 
29 Hun (N. Y.) 87; Manning v. San 
Antonio Club, 63 Tex. 166; s. c, 51 
Am. Rep. 639; Elsas v. Alford, i City 
Ct. Rep. 123; Fritz v. Muck, 66 How. 
Pr. (N. Y.) 74; Innes v. Wylie, i Car. 
& K. 262: Hyde v. Woods, 2 Sawyer 
(U. S.) 655; White V. Brownell, 2 Daly 
(N. Y.) 329. Compare Heath v. Presi- 
dent of N. Y. Gold Exchange, 7 Abb. 
Pr., N. S. (N. Y.) 251; 38 How. Pr. 
168; Savannah Cotton Exchange v. 
State, 54 Ga. 668; Gray v. Christian 
Soc, 137 Mass. 329; s. c, 50 Am. Rep. 
310; District Grand Lodge v. Jededah 
Lodge, 65 Md. 236; Mulroy v. Knights 
of Honor, 28 Mo. App. 463; Austin v. 
Searing, 16 N. Y. 112; s. c, 69 Am. 
Dec. 665; Supreme Council of the Order 
of Chosen Friends v. Garrigus, 104 
Ind. 133; s. c, 54 Am. Rep. 29S; Bauer 
V. Samson Lodge, 102 Ind. 262. 

2. Bacon Ben. Soc. & Ins., § 92. See 
also St. Patrick's Ben. Soc. v. McVey, 
92 Pa. St. 510; McCabe v. Father 
Matthew etc. Soc, 24 ,Hun (N. Y.) 
149. 



In the latter case it was held that a 
member of a beneficial society does not 
stand in the relation of a creditor to it, 
and can only claim such benefits as are 
prescribed hy the by-laws existing at 
the time he applies for relief; that it is 
wrong to treat the by-law in existence 
when the plaintiff became a member as 
part of a contract unalterable except 
with his consent. In the first case 
the court said: "The plaintiff was 
bound by these changes. The charter 
gave no right of action. The constitu- 
tion and by-laws were liable to change. 
The changes were made in the way 
pointed out by the constitution and 
laws. . . No notice was required to 
be given to plaintiff. The by-laws pro- 
vide for none, and they do provide for 
a change by resolution proposed one 
week before it could be passed. It was 
doubtless designed that this delay 
would operate to give notice to all per- 
sons interested. A notice to all the 
members would be a great burden." 

A member is bound by a by-law 
which vests in a committee authority 
to determine whether a member, claim- 
ing to be sick, is entitled to the benefit 
provided for in the by-law, and the de- 
cision of such committee upon the ap- 
plication of a member for aid is 
final. Van Poucke v. Netherland St. 
Vincent De Paul Soc, 63 Mich. 
378. 



43 



Certificates of 



MUTUAL INSURANCE. 



Kembership. 



to benefits has happened, and he cannot be by the act of the in- 
surer deprived of them.^ 

The effect of the violation of a by-law upon the rights of the par- 
ties is often an important question, the result sometimes being to 
render the contract voidable by the company. In contracts con- 
cerning fire insurance, the violation of provisions of the by-laws, 
in relation to subsequent insurance, encumbrances and classifica- 
tion of risks, is generally involved. 

Here, again, the rule that the members of mutual companies 
are presumed to know the by-laws, constitutes a marked distinc- 
tion between their contracts and those of regular stock compa- 
nies. It is held in many cases that the ofificers, being special agents 
with powers limited and defined by the by-laws, cannot suspend 
them when matters touching the substance or essence of the con- 
tract are involved.^ 

But if this view may be considered as at all settled upon the 
authorities, it is subject to many exceptions. The first impor- 
tant exception rises out of the distinction that is taken by the 
courts between mandatory and merely directory requirements.* 



1. Poultney v. Bachraan, 62 How. 
Pr. (N. Y.) 466. 

In this case the court said: "The 
contract is to be interpreted like any 
other contract of insurance, in which, 
as a rule, is incorporated a clause giv- 
ing the insured or insurer the right to 
end the risk. It would certainly be a 
somewhat novel construction of the 
clause conferring such power of termi- 
nation, to hold that, after a loss has 
occurred to the insured, against which 
the agreement was to protect, the pay- 
ment of the sura stipulated for could be 
either reduced or repudiated by the in- 
surer. Yet thie, as it seems to me, is 
the precise position assumed by the de- 
fendant. Upon his becoming sick, as 
has been before stated, the plaintiiT's 
right to four dollars per week during 
his illness became a vested one, and it 
would be most unreasonable and un- 
conscientious so to construe the by-law 
giving the power of amendment, as to 
confer upon the members of the lodge 
the authority to deprive him of that to 
which he had thus become clearly en- 
titled." See Kent v. Quicksilver Min. 
Co., 78 N. Y. 159; Bauer v. Samson 
Lodge, 102 Ind. 262; Gundlach v. Ger- 
mania Mechanics' Assoc, 4 Hun (N. 
Y.) 339; Pellazzino v. German 
Catholic Soc, 16 Cin. L. Bui. 27. But 
see Torrey v. Baker, i Allen 120; 
Fugure v. Society St. Joseph, 46 Vt. 362. 

A contrary conclusion was reached 
where both the general laws of the 
State, and the by-laws of an incorpo- 



rated societ}' gave it the right to repeal 
alter, or amend its by-laws. It was 
held not a breach of contract for such 
society to amend a by-law which pro- 
vides that, in case of sickness, a mem- 
ber shall be entitled to receive $10 per 
week, by limiting such allowance to a 
certain number of weeks thereafter, 
though a member was sick at the time 
of such amendment. Stohr v. San 
Francisco Musical Fund Soc, 82 Cal. 

557- 

Notice of Changes. — Members of a 
mutual benefit association are charge- 
able with notice of amendments to its 
constitution and by-laws where they 
are provided for therein. May v. New 
York Safety Reserve Fund Soc, 14 
Daly (N. Y.) 3S9. 

2. Behler v. German Mut. F. Ins. 
Co., 68 Ind. 354; Leonard v. American 
Ins. Co., 97 Ind. 305; Hale v. Mechan- 
ics' Mut. F. Ins.' Co , 6 Gray (Mass.) 
169; s. c, 66 Am. Dec 410; Evans v. 
Tri-Mountain Mut. F. Ins. Co , 9 Allen 
(Mass.) 329; Brewer v. Chelsea Mut. 
F. Ins. Co., 14 Gray (Mass.) 209. 
Compare Westchester F. Ins. Ins. Co. 
■V. Earle, 33 Mich. 150. 

It was held in Day v. Mill Owners' 
Mut. F. Ins. Co. (Iowa), 38 N. W. Rep. 
113, that one who, by insuring with a 
mutual fire company, has become a 
member, is not estopped to deny that 
amendments to the constitution not 
made known to him when he took the 
policy were part of the contract. 

3. In Union Mut. F. Ins. Co. v. 



44 



Certificates of 



MUTUAL INSURANCE. 



Uembership, 



The principles of agency must be considered in determining 
questions of this kind. Where directors are, as in many States, 
empowered to exercise all the corporate powers, their act may 
well be considered that of the corporation, which may waive con- 
ditions and rules established for its own beneiit, as in the case of 
other parties to contracts.^ 

If it be said that such acts are ultra vires, it may be replied 
that after the party has acted under the contract, it may be con- 
sidered as partly executed, and to estop the company from claim- 
ing its lack or excess of corporate power.^ 

The rule that laws cannot be retroactive, applies to by-laws as 
to other legislation ; therefore, their operation must be future and 
not relate to transactions under which vested rights have accrued. 
The only question which can arise upon changes in the by-laws, 
is to what extent the original contract, agreeing to future changes, 
, is affected.* 



Keyser, 32 N. H. 313; s. c, 64 Am. 
Dec. 375, the directors acted under a 
charter, which vested all powers relating 
to contracts in them; one provision of 
which was that they should divide the 
property insured into classes. After 
by-laws had been made establishing a 
rule for the division of risks, they 
knowinglj' insured property in one 
class which belonged in another, and 
in passing upon the question raised by 
this violation of the laws of the com- 
pany, the court said: "In this case the 
action of the directors may have been 
irregular, contrary to the established 
usage, and in violation of their own 
rules, and of the by-laws; but it was 
still within the scope of their authority, 
expressly conferred on them by the 
charter, and therefore binding on the 
company." 

1. Davenport v. Peoria M. & F. Ins. 
Co., 17 Iowa 276; New England F. & M. 
Ins. Co. V. Schettler, 38 111. 166; Insur- 
ance Co. V. Wilkinson, 13 Wall. CU. S.) 
222; Emery v. Boston Marine Ins. Co., 
138 Mass. 410. 

In a case calling for a construction of 
Stat. Mass. 1882, ch. 78, providing that 
"the beneiit to accrue by reason of the 
decease of members of the Boston 
Police Relief Association, or their 
wives, may be extended" to members 
retired under Stat. 1S78, ch. 244, § 5, the 
former statute was held to be permis- 
sive merely. It was further held that 
the association may extend the benefit 
to a part only of the class named, by a 
by-law; and if this is done, the associ- 
ation will not be bound by the acts of 
its officers in extending the benefit to 



those not included by such by-law. 
Burbank v. Boston Police Relief Assoc, 
144 Mass. 434. 

It is said in some of the cases that 
the provisions of the by-laws of a cor- 
poration are made for the benefit of the 
company and may be waived. Splawn 
V. Chew, 60 Tex. 532; Manning xk 
Ancient Order United Workmen, 86 
Ky. 136; Sanborn v. Fireman's Ins. Co., 
16 Gray (Mass.) 448; s. c, 77 Am. Dec. 
419; Cumberland Valley Mut. Protec- 
tion Co. f. Schell, 29 Pa. St. 31; Prince 
of Wales etc. Co. v. Harding, i E. B. & 
E. 183; Sheldon v. Connecticut Mut. L. 
Ins. Co., 25 Conn. 221; s. c, 65 Am. 
Dec. 565. 

2. See Fuller v. Boston Mut. F. Ins. 
Co., 4 Mete. (Mass.) 206; Lamont v. 
Grand Lodge Iowa Legion of Honor, 
31 Fed. Rep. 177; Bloomington Mut. 
Ben. Assoc, v. Blue, 120 111. 127; New 
England F. & M. Ins. Co. v. Schettler, 
38 111. 166. 

3. Stewart 7'. Lee Mut. F. Ins. Assoc, 
64 Miss. 49Q. 

A party had insured his property and 
given his note for the amount of the 
premium, with interest, and the com- 
pany afterwards passed a by-law, at a 
meeting where he was not present, de- 
claring that if the interest on any pre- 
mium note should be three months in 
arrears, "the policy shall be suspended, 
and of no effect to make the company 
liable for loss until the interest be paid." 
His property insured was destroyed by 
fire, when the interest on his note had 
been more than three months in arrears. 
It was held that this by-law had no 
effect on the contract between the par- 



45 



Beneficiaries. MUTUAL INSURANCE. Designation. 

The contract of membership, so far as it carries with it property- 
rights, is not forfeitable otherwise than under statutory authority. 
Therefore, a by-law of a benefit society, passed without power 
conferred for the purpose in the charter or general law, after the 
issuance of a certificate, and providing for forfeitures of the in- 
terest which its members hold under their certificates to share 
benefits and death losses, would be of no force or validity.^ 

But provisions for forfeiture, existing at the time of entering 
into such contracts, or whether pre-existing or not, if embodied in 
the certificates, have frequently been held valid and enforceable.^ 

A penalty is sometimes authorized by statute, and inflicted un- 
der the provision of the by-laws. 

Such provisions, whether found in statutes, charters, or by- 
laws, are strictly construed.* 

It may be provided that, upon failure to pay an instalment or 
assessment due upon a premium note, the entire amount of which 
is given shall become due and payable.* 

IV. Beneficiaries — 1. Designation. — An important diffei-ence 
between ordinary insurance companies and benefit societies con- 
sists in the fact that the beneficiaries of the latter are generally 
restricted and limited to those who are heirs, relatives, or depend- 
ents of the insured. Whether contained in the charter, articles, 
or by-laws, the restrictions must be observed, and in making con- 
tracts the society has no power to go beyond them. It is usually 
prescribed in the charter or articles who may become members 
and enjoy the benefits of membership as beneficiaries, after the 
death of members ; and the rights of the parties cannot be altered 

ties, and that the company must pay but the sovereignty. The only means 

the insured the amount of his loss. In- for the enforcement of corporate charges 

surance Co. v. Connor, 17 Pa. St. and penalties is by action. Summary 

136. means and methods unknown to the 

In one case it was held that a con- common law must be authorized by ex- 
tract could not be varied by the direct- press authority. And it would not be 
ors by means of a by-law, so as to put reasonable to enforce a pecuniary obli- 
an assured in a particular class which gation or penalty by means disproppr- 
called for an assessment only on the tionate to its importance. The law of 
policy-holders of that class, unless the the land is made the test for ana.logies 
assured knew of and assented to such in cases where it affords analogies." 
by-law. Stewart v. Lee Mut. F. Ins. See also Matter of Long Island R. Co., 
Assoc, 64 Miss. 499. See Bacon Ben. 19 Wend. (N. Y.) 37; s. c, 32 Am. Dec. 
Soc. & Ins., § 185. 429; Westcott v. Minnesota Min. Co., 

As to the power to enact by-laws 23 Mich. 145. 

with reference to changes of benefici- 2. See VII. Forfeiture and Sus- 

ary, and the effect of such by-laws, see pension of Contracts, infra. 

Change of Beneficiary, IV, 3, 3. Mor. Priv. Corp., 123. 

infra. 4. Jones v. Sisson, 6 Gray (Mass.) 

1. In Pulford v. Fire Department, 31 288;, Bangs v. Mcintosh, 23 Barb. (N. 

Mich. 458, 465, the court said: "There Y.) 591; St. Louis Mut. F. & M. Ins. 

can be no power to impose forfeitures Co. v. Boeckler, 19 Mo. 135; Beadli v. 

unless granted by clear legislative en- Chenango Co. Mut. Ins. Co., 3 Hill 

actment. No such power is consistent (N. Y.) 161; Bangs v. Bailey, 37 Barb, 

with common law or ancient right, and (N. Y.) 630, see Premium Notes, III, 

it cannot be obtained from anything 6, sufra. 

46 



Beneficiaries. 



MUTUAL INSURANCE. 



Designation. 



by contract, by either or both of the parties, in violation of such 
restrictions.^ 

The doctrine of ultra vires applies to such cases as to acts of 
corporations generally, and the same exception and application of 
the doctrine of estoppel is made where, by the death of the mem- 
ber, the contract has become executed.^ 

In the absence of any restrictions, the society may constitute 
any one the beneficiary of a member.** 



1. Luhrs V. Supreme Lodge Knights 
and Ladies of Honor, 7 N. Y. Supp. 487; 
Supreme Council American Legion of 
Honor v. Perry, 140 Mass. 589; Ken- 
tucky Masonic etc. L. Ins. Oo. v. Miller, 
13 Bush (Ky.) 489; Presbyterian Mut. 
Assurance Fund v. Allen, 106 Ind. 593; 
Elsey V. Odd Fellows Mut. Relief 
Assoc, 142 Mass. 224; State v. People's 
Mut. Ben. Assoc, 42 Ohio St. 579; 
Supreme Council Knights of Honor v. 
Nairn, 60 Mich. 44; National Mut. Aid 
Assoc. V. Gonser, 43 Ohio St. — ; 
Leonard v. American Ins. Co., 97 Ind. 
305; Ben. Soc. v. Dugre, ii fe. L. 
(Queb.) 344. 

Bacon Ben. Soc. and Ins. Sees., 168, 
248; Kentucky Masonic etc. L. Ins. Co. 
V. Miller, 13 Bush (Ky.) 489. 

For a review of the principles govern- 
ing the subject of insurable interest, 
see Connecticut Mut. L. Ins. Co. v. 
Shaefer, 94 U. S. 457; Insurance, ii 
Am. & Eng. Encyc. of Law 312; Life 
Insurance, 13 Am. & Eng. Encyc. of 
Law 650; Fire Insurance, 7 Am. & 
Eng. Encj'c. of Law 1020. 

It is only when the right of designa- 
tion of beneficiary is unrestricted that 
the question of insurable interest and 
the rules of construction governing the 
same become important. Freeman v. 
National Ben. Soc, 42 Hun (N. Y.) 
252, provided the contract be not in fact 
a mere cover for a wagering transac- 
tion. 

Stat. Mass. 1882, ch. 195, authorizing 
corporations organized under Pub. Stat., 
ch. 115, for the purpose of assisting the 
widows, orphans or other persons 
dependent upon members to include 
among the beneficiaries other relatives 
of deceased members, does not author- 
ize a certificate payable to a creditor of 
a member. Skillings z>. Massachusetts 
Ben. Assoc, 146 Mass. 217. 

Under the by-laws of an association 
providing that a member may designate 
as beneficiary of the fund accruing at 
his death, on the certificate held by 
him, any one "related to him," the wife 



of his nephew cannot be made such 
beneficiary, as the by-laws contemplate 
only blood relations. Supreme Council 
of the Order of Chosen Friends v. Ben- 
nett (N. J.), 19 Atl. Rep. 785. 

The by-laws of a mutual beneficiary 
association organized under Stat. Mass. 
1877, ch. 204, § I (Pub. Stat., ch. 115, 
§§ 2, 8), provided that only male Ro- 
man Catholics between the ages of 20 
and 51 years were eligible to mem ter- 
ship. The application of decedent which 
designated plaintiff as his beneficiary 
described him as about 49 3'ears old, 
when in fact he was oVer 51 years old. 
It was held that even if the officers of 
the corporation attempted to waive the 
condition as to age they could not do 
so. McCoy V. Roman Catholic Mut. 
Ins. Co. (Mass.), 25 N. E. Rep. 289. 

2. Martin v. Stubbings, 126 111. 387; 
Michigan Mut. Ben. Assoc, v. Rolfe, 
76 Mich. 146; Marsh v. Supreme Coun- 
cil American Legion of Honor, 149 
Mass. 512; Lamont v. Grand Lodge 
Iowa Legion of Honor, 31 Fed. Rep. 
177; Mutual Ben. Assoc, v. Hoyt, 46 
Mich. 473; Bloomington Mut. Ben. 
Assoc. V. Blue, 120 111. 127; s. c, 60 Am. 
Rep. 558. 

3. Mitchell V. Grand Lodge Iowa 
Legion of Honor, 70 Iowa 360; Swift 
V. Railway etc. Mut. Ben. Aid Assoc, 
96 111. 309; Massey v. Mutual Relief 
Soc, 102 N. Y. 1523; Eckert v. Mutual 
Relief Soc, 2 N. Y. Supp. 612. 

In the following casps the terms of 
the constating instruments were held 
not to contain limitations upon classes 
eligible as beneficiaries. Where the 
words of the articles of association were 
that "the general nature of its business, 
and its general purpose, is the insuring 
the lives of the members upon the plan 
of paying to the representatives of 
every deceased member a certain sum, 
to be assessed upon and received from 
the other members of said association." 
Walter v. Odd Fellows' Mut. Ben. Soc, 
42 Minn. 204. Where the law of the 
corporation required applicants to enter 



47 



Beneficiaries. 



MUTUAL INSURANCE. 



Designation, 



But if the persons who may be beneficiaries, are, by the charter, 
hmited to certain classes, and the certificate holder designate 
some one not of such classes, the designation is void, and any 
money paid to such beneficiary is held by him in trust for the 



upon their applications "the name or 
names of the members of their family, 
or those dependent upon them," to 
whom they desired the benefit paid, and 
that members in good standing might 
surrender ttieir certificates and have new 
ones issued, payable "to such beneficiary 
or beneficiaries dependent upon them as 
they may direct." Marsh v. Supreme 
Council American Legion of Honor, 
149 Mass. 512. The same rule was de- 
clared of a provision in the constitu- 
tion that the object of the "order" is to 
"aiford financial aid and benefit to the 
widows, orphans and heirs or devisees 
of the deceased members of the order." 
Lamont v. Grand Lodge Iowa Legion 
of Honor, 31 Fed. Rep. 177. Likewise 
where the purpose of the association, as 
recited in the charter, was to furnish 
life indemnity or pecuniary benefits 
to devisees or legatees of members. 
Bloomington Mut. Life Ben. Assoc, v. 
Blue, 120 111. I2t; s. c, 5o Am. Rep. 
558. Likewise where the charter de- 
clared its purposes to be "benefiting and 
aiding the widows and orphans of de- 
ceased members." A by-law provided 
that the benefits on the death of a mem- 
ber should be payable "to such person 
as the deceased may have designated to 
receive the same, as appears on the 
books of the lodge of which he is a 
member." Maneely v. Knights of Bir- 
mingham, 115 Pa. St. 105. Also where 
the articles provided that its object was 
to 'provide benevolence and charity by 
establishing a widows' and orphans' 
fund, from which, on satisfactory evi- 
dence of the death of a member, . . . 
a sum not exceeding $2,000 shall be 
paid to his family, or as he may direct." 
Mitchell V. Grand Lodge Iowa Knights 
of Honor, 70 Iowa 360. 

A provision of the society's constitu- 
tion limiting the beneficiaries to the 
members of assured's family, or those 
dependent upon him, is for the society's 
benefit only; and where it paid the 
money into court the limitation cannot 
aid the widow's claim. Johnson v. Su- 
preme Lodge of Knights of Honor 
(Ark.), 13 S. W. Rep. 794. 

Construction of Statutes and By-laws. 
— ^V'here the the designation was to 
"legal heirs," it was held that, if there 



were no children or descendants of any 
child, his widow was entitled to the 
whole fund. Lawwill v. Lawwill, 29 111. 
App. 643. 

A member's mother comes within 
the term "families or heirs" as used in 
Ohio Rev. Stat., § 3630, relating to mut- 
ual benefit societies. Young Men's 
Mut. Life Assoc, v. Harrison, 23 Wk. 
Law Bui. 360. 

A member's wife is preferred to his 
mother within the meaning of the laws 
of a benefit society, providing that care 
must be taken to see that the person or 
persons of a member's family legally 
dependent on him are the ones to be 
named as his beneficiaries. Arthar.s v. 
Baird, 8 Pa. Co. Ct. Rep. 67, 71. 

The term "legal representatives" re- 
fers to the widow, orphans and heirs of 
the member, within the meaning of the 
objects of an association, stating to be 
to provide pecuniary aid "for the 
widows, orphans, heirs and devisees of 
deceased members, and for no other 
purpose whatever." Murray v. Strang, 
28 111. App. 608. 

Where by the terms of the certificate _ 
the fund was payable to "the heirs of ' 
the person insured by virtue of this 

policy," and that it "will be paid to , 

or lawful heirs," and the by-laws de- 
clare that "its object is to aid and bene- 
fit the families of deceased members of 
the brotherhood in a simple and sub- 
stantial manner," a designation by the 
deceased of his wife and children as 
beneficiaries was held lo entitle them 
to the fund. Hannigan v. Ingraham, 8 
N. Y. Supp. 232. 

A certificate was payable to insured's 
wife, E, or to such other person as 
might be entitled to the insurance. 
After the death of E the insured mar- 
ried plaintiff, but made no change as to 
the beneficiary. The objects of the ag- 
sociation, as declared in its by-laws, 
were to aiford financial aid to the 
widows, orphans and heirs of deceased 
members, or to such other persons as 
might be designated by the insured 
member. On the death of the member 
it was held that his widow and not the 
children of deceased wife was entitled 
to the insurance. Rilev v. Riley (Wis.), 
44 N. W. Rep. 112. 



48 



Beueflciaries. 



MUTUAL INSURANCE. 



Designation, 



persons entitled to receive it, under the laws of the society, in de- 
fault of a designation.* 

But a designation, valid in its inception, remains so, although 
the insurable interest or relationship of the beneficiary has ceased, 
unless it is otherwise stipulated in the contract.* 

The real property interest is vested in the beneficiary, though 
it is simply equitable and liable to be defeated by the act of him 
in whose name it is made. The latter has the naked legal right.* 

His only power over the benefit is that of appointing some .one 
to receive it.* 

Under some circumstances, if no designation is made, as re- 
quired by the fund-law of the organization, the benefit reverts to 
the society. 

The member has, however, a property right in the contract of 
membership, which the courts will protect, and which must be dis- 



The wife of a nephew does not come 
within the meaning of the words "re- 
lated to him" in a certificate. Supreme 
Council of Order of Chosen Friends v. 
Bennett (N. J.), 19 Atl. Rep. 785. 

"Affianced wife" in a certificate does 
not come within the meaning under 
Stat. Mass. 1882, eh. 195 (Pub Stat., ch. 
115), which authorizes corporations to 
assist "the widows, orphans or other 
relations of deceased members, or any 
persons dependent upon deceased mem- 
bers." Palmer v. Welch (111.), 23 N. E. 
Rep. 412. 

Adults are not orphan children with- 
in the meaning of the regulations of 
the beneficiary fund providing that, 
"should there be no widow, then the 
said amount shall be paid to the lodge 
of which the deceased was a member, 
for the use or benefit of his orphan 
children, in equal shares. In case there 
should be no widow, child or children, 
or designated person or object, the 
amount shall be paid to his executor 
or administrator." Hammersteain v. 
Parsons, 29 Mo. App. 509. 

1. Daniels v, Pratt, 143 Mass. 216; 
Supreme Lodge American Legion of 
Honor v. Perry, 140' Mass. 580. 

2. Clark z<. Allen, ii R. I. 439; s. c, 
23 Am. Rep. 496; Dalby v. India etc. 
Assoc. Co., 11; C. B. 365; Connecticut 
Mut. L. Ins, Co. V. Schaefer, 94 U. S. 
457; McKee v. Phcpni.x Ins. Co., 28 
Mo. 383; 75 Am. Dec. 129; Provident 
L. Ins. & Investment Co. v. Baum, 29 
Ind. 236; Campbell f. New England 
Mut. L. Co., 98 Mass. 381; Bacon Ben. 
Soc. & Ins. 253. 

In one case it was held that a wife, 
designated as the beneficiary, from 

16 C. of L.— 4 49 



whom the husband, who held the cer- 
tificate, had been divorced, could not 
take under it, because the statute re- 
stricted the beneficiaries to the depend- 
ents, or families, or relatives. Tyler v. 
Odd Fellows' Mut. R. Assoc., 145 
Mass. 134. 

3. Bloomer x>. Waldron, 3 Hill (N. 
Y.) 365; Arthur v. Odd Fellows' Ben. 
Assoc, 29 Ohio St. 557; Maryland Mut. 
Ben. Soc v. Clendinen, 44 Md. 429; s. 
c, 22 Am. Rep. 52. This he can only 
exercise in accordance with the constitu- 
tion and by-laws. Swift v. Railway 
etc. Mut. Aid & Ben. Assoc, 96 111. 309; 
Gentry v. Supreme Lodge Knights of 
Honor, 23 Fed. Rep. 718; Worley v. 
Northwestern Masonic Aid Assoc, 10 
Fed. Rep. 227; Eastman v. Provident 
Mut. Relief Assoc. (N. H.), 20 Cent. 
L. J. 266; Barton v. Provident Mut. 
Relief Assoc, 63 N. H. 535; Greeno v. 
Greeno, 23 Hun (N. Y.) 478; Masonic 
Mut. Relief Assoc, v. McAulej', 2 
Mackey (D. C.) 70; Presbyterian 
Assurance Fund v. Allen, 106 Ind. 593; 
Richmond t). Johnson, 28 Minn. 447; 
Masonic Mut. Ben. Soc. v. Burkhart, 
no Ind. 189; Kentucky Masonic Mut. 
L. Ins. Co. V. Miller, 13 Bush (Ky.) 489: 
Van Bibber •?'. Van Bibber, 82 Ky. 347; 
Duvall V. Goodson, 79 Ky. 224; Arthur 
V. Odd Fellows' B. Assoc, 29 Ohio St. 
557; Tennessee Lodge v. Ladd, 5 Lea 
(Tenn.) 716; Durian v. Central Verein, 
7 Daly (N. Y.) 168; Supreme Council 
Catholic Mut. Ben. Assoc, v. Priest, 46 
Mich. 429. See Change of Benefi- 
ciary. 

4. Maryland Mut. Ben. Soc. v. Clen- 
dinen, 44 Md. 433; Arthur v. Odd Fel- 
lows Ben. Assoc, 29 Ohio St. 557; Hel- 



Beneficiaries. 



MUTUAL INSURANCE. 



Limitations. 



tinguished from his right to appoint a beneficiary of the insur- 
ance money. ^ 

A power of appointment, restricted to a particular class, is 
called special,^ and the doctrines concerning and distinctions 
between general and special powers apply to certificates and con- 
stating instruments of societies. The designation must be by the 
prescribed instrument,^ executed according to the requirements 
and formalities pointed out in the certificate or constating instru- 
ments, or both considered together.* 

The law of situs of the subject of the power controls the exe- 
cution of the power.* 

That the benefit will not pass under the residuary clause of a 
will, nor by the general ^disposition of all the testator's property, 
unless some authority for that purpose is provided in the laws of 
the organization,^ is well settled by the authorities.'^ 

2. Limitations and Their Constructions. — The cardinal rule is that 
the one to whom a certificate is issued may have as wide a range 
of choice in selecting a beneficiary as the certificate, the organic 
law of the association, and its by-laws, taken together, give him;^ 
and that, in the absence of restrictions, his power in this respect is 
unlimited.^ 



lenberg v. District No. i I. O. B. B., 94 
N. y. 580; Bishop V. Empire Order 
Mut. Aid, 43 Hun 472. 

1. Bacon Ben. Soc. & Life Ins. 237. 

2. 2 Washb. Real Prop. 307. 

3. 2 Washb. on Real Prop. 317; i 
Sugden on Powers, 255; Daniels v. 
Pratt, 143 Mass. 216; Worley v. North- 
western Masonic Aid Assoc, 10 Fed. 
Rep. 227. 

4 Holland v. Taylor, iii Ind. 121; 
Daniels %>. Pratt, 143 Mass. 216; Elliott 
V. Whedbee, 94 N. Car. 115; Supreme 
Lodge Knights & Ladies of Honor v. 
Grace, 60 Tex. 571; Supreme Council 
American Legion of Honor v. Perry, 
140 Mass. 580; Presbyterian Mut. 
Assur. Fund v. Allen, 106 Ind. 593; i 
Sugden on Powers, 250, 255; 2 Washb. 
on Real Prop. 317. 

Mr. Sugden says: "In the iirst it 
would be in direct opposition to the 
agreement to consider the estate 
charged when the mode pointed out is 
not adhered to; in the second, to dis- 
pense witlj the solemnities and forms 
required to attend the execution of the 
power, is to deprive a man of the bridle 
which he has thought td impose on his 
weakness or frailty of mind, in order 
effectually to guard himself against 
fraud or imposition." 

A gift of a mutual benefit certifi- 
cate by husband to wife, she being the 
beneficiary named therein, is not suf- 



ficiently shown by the husband's decla- 
rations that he had given the insurance 
to her, and by her possession of it, he 
having afterwards obtained it, and pro- 
cured a change in the beneficiary. Su- 
preme Council Catholic Knights v. 
Morrison (R. I.), 17 Atl. Rep. 

5. Bingham's Appeal, 64 Pa. St. 345. 

6. Weil V. Trafford, 3 Term. Ch. 108, 

7. Eastman v'. Provident Mut. R. 
Assoc. (N. H. 1883), 20 Cent. L, j. 267; 
Greeno v. Greeno, 23 Hun (N. Y.) 478; 
Highland v. Highland, 109 111. 366; 
Morey v. Michael, 18 Md. 241; Hellen- 
berg V. Dist. No. i of I. O. B. B., 94 N. 
Y. 580; Maryland Mut. Ben. Assoc, v. 
Clendinen, 44 Md. 429; s. c, 22 Am. 
Rep. 52; Arthur v. Odd Fellows' Ben. 
Assoc, 29 Ohio St. 557. Contra, Kepler 
V. Supreme Lodge Knights of Honor, 
45 Hun (N. Y.) 274; Bown v. Catho- 
lic Mut. Ben Assoc, 33 Hun (N. Y.) 
263; St. John's Mite Assoc, v. Buchly, 
5 Mackey (D. C), 406. 

It has been held, however, that de- 
fects or irregularites of form or manner 
of designation could be waived by a 
lodge. Kepler v. Supreme Lodge 
Knights of Honor, 45 Hun (N. Y.) 274. 

8. See Designation of Benefi- 
ciary, I, supra. 

9. Massey v. Mutual Relief Soc, 102 
N. Y. 523; Freeman v. Nat. Ben. Soc, 
42 Hun (N. Y.) 252; Mitchell v. Grand 
Lodge Iowa Knights of Honor, 70 Iowa 



50 



Beneficiaries. 



MUTUAL INSURANCE. 



Limitations. 



A liberal construction will be given to the certificate, organic 
law, and by-laws, with a view to determining whether the desig- 
nated beneficiary comes within the class specified or not, and, at 
the same time, carrying out the benevolent purposes of the organ- 
ization. And yet care will be taken that the statute law of the 
State be not violated nor public policy contravened.^ 

Unless the statute law or public policy of the place where en- 
forcement is sought forbid, the lex loci contractus governs.^ 

General rules of construction must be resorted to and applied 
to the charters, laws, and certificates of benefit societies as well as 
to the various statutes relating to them. These are of a mani- 
fold nature and analogous to the general rules of construction of 
contracts and wills, for the subject matter partakes of the charac- 
teristics of them all.3 And the court will, if possible, so construe 
the designation as to bring it within the power given by the stat- 
utes.* 



360; Gentry v. Supreme Lodge Knights 
of Honor, 23 Fed. Rep. 718; Bayse v. 
Adams, 81 Ky. 368; Supreme Lodge 
Knights of Honor v. Martin, 12 Ins. L. 
J. 628; 13 W. N. C. (Pa.) i6o'; Supreme 
Lodge Knights of Honor v. Nairn, 60 
Mich. 44; Swift V. Railway etc. Mut. 
Aid & Ben. Assoc, 96 III. 309. 

1. Elsey V. Odd Fellows' Mut. R. 
Assoc, 142 Mass. 224, 225; Maneely v. 
Knights of Birmingham, 115 Pa, St. 
305; Supreme Lodge Knights of 
Pythias v. Schmidt, 98 Ind. 374; Ballou 
V. Gile, 50 Wis. 614; Supreme Council 
American Legion of Honor v. Perry, 
140 Mass. 580. 

A collection of the terms used in the 
bylaws of some of the leading orders and 
benefit societies, designating the classes 
of persons to whom their benefits may 
be made pa3'able, may be found in Ba- 
con's Ben. Soc. & Life Ins. 254. The 
following words designating classes of 
persons entitled to benefits have re- 
ceived judicial construction: "Families 
and heirs," National Mut. Aid Assoc, v. 
Gonser, 43 Ohio St. i ; "to his family, or 
as he may direct," Gentry v. Supreme 
Lbdge Knights of Honor, 23 Fed. Rep. 
718; Mitchell V. Grand Lodge Iowa 
Knights of Honor, 70 Iowa 360; "wid- 
ows, orphans, heirs and devisees," 
Worley v. Northwestern Masonic Aid 
Assoc, 10 Fed. Rep. 227; "legal repre- 
sentatives," Expressmen's Aid Soc. -a. 
Lewis, 9 Mo. App. 412; "widows, 
orphans, heirs or devisees," Covenant 
Mut. Ben. Assoc, v. Sears, 114 111. 108; 
"to his family or those dependent on 
him," Ballou v. Gile, 50 Wis. 614; 
''families of deceased members or their 



heirs," Elsey v. Odd Fellows' Mut. R. 
Assoc, 142 Mass. 224; "families or rela- 
tives," Van Bibber v. Van Bibber, 82 
Ky. 347; Presbyterian Mut. Assur. 
Fund V. Allen, 106 Ind. 593; "to family, 
orphans or dependents," Supreme 
Council American Legion of Honor t'. 
Perry, 140 Mass. 580, 

2. Daniels v. Pratt, 143 Mass, 216; 
Supreme Lodge Knights of Honor v. 
Nairn, 60 Mich, 44; Supreme Council 
American Legion of Honor v. Perry, 
140 Mass. 580, 

3. Bacon Ben, Soc, & L, Ins, 255. 
This author says: "The primary rule 

is, that the intent of the legislature, 
parties to a contract or designator must 
be first ascertained and then carried into 
effect; and this intention must be judged 
of exclusivelj' by the words of the in- 
strument, if unambiguous, as applied to 
the subject-matter and the surrounding 
circumstances. The whole of the stat- 
ute, law, or designatory writing must 
be looked at and considered; and words 
are supposed, unless the contrary be 
shown, to have been used in their ordi- 
nary, every-day sense and with the 
meaning a long line of judicial decisions 
has given them." Citing- 1 Redf. on 
Wills, * 433 and vol, 2, * 20; 2 Pars, 
on Con, * 494; Bishop on Con,, § 
380. 

4. Ballou V. Gile, 50 Wis. 614; Su- 
preme Council American Legion of 
Honor v. Perry, 140 Mass. 580; Elsey 
V. Odd Fellows' Mut. R. Assoc, 142 
Mass. 224. 

In Duvall v. Goodson, 79 Ky. 224, 
the court said: "A life policy f^r the 
benefit of the family of the person pro 



51 



Beneficiaries. 



MUTUAL INSURANCE. 



Change of. 



The rules and regulations of benefit societies are construed 
liberally in order to effect benevolent objects.-'- 

When several beneficiaries are named in a certificate, the same 
rule applies as in ordinary policies, which is that if one or more 
of them die before the maturity of the contract, the benefit en- 
ures to the survivors, and that so long as any of the beneficiaries 
are living, the assured has no interest in the policy and cannot 
assign it.* 

If a certificate or policy name two beneficiaries, and provides 
that, in the case of the death of either, the full amount shall go to 
the survivor, the question of survivorship relates to the date of 
the death of the insured and not to the date fixed for payment.' 

The word " or " will be understood between the words where 
several classes are named in succession without connective words, 
and the persons belonging to the respective classes will take in 
the order named. Thus, if brothers, sisters, heirs, etc., are named, 
and, at the date of the maturity of the contract, there are no 
brothers, the sisters will take, and the heirs if there are neither 
brothers nor sisters.* 

3. Change of Beneficiary. — The right of the person to whom a 
certificate of membership in a benefit society is issued to direct 
the payment of the proceeds of the contract to a person other 



curing, though not a. testament, is in 
the nature of a testament, and in con- 
struing it the court should treat it, as 
far as possible, as a -will, as in so doing 
they -will more nearly approximate the 
intention of the persons the destina- 
tion of whose bounty is involved in 
such cases." 

1. Gundlach v. Germania Mechan- 
ics' Assoc, 4 Hun (N. Y.) 339; Su- 
preme Council American Legion of 
Honor v. Perry, 140 Mass. 580; Su- 
preme Lodge Knights of Honor v. 
Martin (Pa.), 12 Ins. L. J. 628; 13 W. 
N. C. (Pa.) 160; Maneely v. Knights of 
Birmingham, 115 Pa. St. 306; Erdmann 
■V. Mut. Ins. Co., 44 Wis. 376; Ballou 
■V, Gile, 50 Wis. 614; Supreme Lodge 
Knights of Pythias v. Schmidt, 98 Ind. 
381; Whitehurst v. Whitehurst, 83 Va. 
133; Masonic Mut.. Relief Assoc, v. 
McAuley, 2 Mackey (D. C.) 70; Du- 
vall V. Goodson, 79 Ky. 224; Van Bib- 
ber V. Van Bibber, 82 Ky. -547; Massey 
V. Mut. Relief Assoc, 102 N. Y. 523; 
Dietrich v. Madison Relief Assoc, 45 
Wis. 79; Expressman's Aid Assoc v. 
Le-wis, 9 Mo. App. 412. 

2. Robinson v. Duvall, 79 Kv. 
83; Day V. Case, 43 Hun (N. Y".) 
179. 

3. Union Mut. Aid Assoc, v. Mont- 



gomery-, 70 Mich. 587; Thomas x'. Leake, 
67 Tex. 469. 

In the second case the member had 
directed the benefit to be paid to his 
son and daughter or the survivor of 
them. The money was, by the terms 
of the certificate, payable ninety days 
after receipt of proof of the death of 
the member, and the son died after his 
father, but within the ninetj' days. In 
deciding that the son's executor and not 
the daughter was entitled to the son's 
share of the fund, the court said: ''The 
provision relating to survivorship ap- 
plies to the one of the two who shall 
survive the donor. If neither survive 
him, the fund goes to the heirs of the 
member. The time of payment pro- 
vided for, namely, ninety days after the 
death of the member, has no reference 
to who shall take as survivor. The 
time of payment is defined simply to 
enable the corporation to raise the fund 
by assessment upon the members." 

4. Covenant Mut. Ben. Assoc, v. 
Sears, 114 111. 108; Kentucky Masonic 
etc. L. Ins. Co. v. Miller, 13 Bush(Ky.) 
489; Addison v. New England Com- 
mercial Travellers' Assoc, 14^ Mass. 
591; Ballou V. Gile, 50 Wis. 614; Ma- 
sonic Mut. Relief Assoc, v. McAuley, 
2 Mackey (D. C.) 70. 



52 



Beneficiaries. 



MUTUAL INSURANCE. 



Change of. 



than that named therein, is the most marked distinction between 
these forms of insurance and ordinary poHcies.^ 

Under the contracts and laws of most societies the power of 
appointment partakes so far of the nature of a testamentary de- 
vise that it may be revoked and a new designation made at any 
time before the maturity of the contract, and the same rules of 
construction apply as in case of other testamentary writings.*^ 



1. Bacon Ben. Soc. & L. Ins. 289. In 
further discussion of the subject he 
says: "In a policy of life insurance the 
undertaking is with the assured, and the 
stipulated sum is payable to him upon 
the contingency named — the ending of 
the life insured. Owing to the form of 
the contract the rights of the person to 
whom the insurance is to be paid be- 
come at once vested when the policy is 
delivered, and cannot be altered or 
affected except by his consent. The 
member of a beneficiary organization, 
on the other hand, as we have seen, has 
no property interest in the benefit, but 
only the naked power of designating 
some one to receive it. This designated 
recipient also has no property nor 
vested rights in the benefit, because his 
interest is contingent and uncertain, 
the power of the member to revoke the 
appointment and substitute a new bene- 
ficiary being specially' reserved by the 
laws of the society, which laws enter 
into and form a part of the contract." 

Still the rules of a mutual benefit 
society may forbid the transfer of its 
benefit certificates for valuable consid ■ 
eration, and where so forbidden a con- 
tract for the sale of such certificate to 
one who has no insurable interest in 
the life of the assured is void under that 
rule, as well as being against public 
policv. 

Stoelker v. TKornton (Ala.), 6 So. 
Rep. 680. In this case it was .held, 
however, that though such a sale be 
against public policy, yet as a matter of 
contract right it is a question between 
the society and the purchaser; and, 
when the society recognizes its validity 
by issuing a new certificate, in which 
the purchaser is named as the benefi- 
ciarj', and upon the death of the as- 
sured pays the money due under the 
certificate to such purchaser, no stran- 
ger or volunteer can assail the validity 
of the payment. 

But it was held in the absence of 
such pi ohibitory provision being shown 
that an assignment of a benefit certifi- 
cate in a benevolent association to one 
not related to the member, but who has 



merely advanced him .$50 against pub- 
lic policy, and the fund goes to the 
heirs, after deducting dues and advance- 
ments made by the assignee; and that 
it was immaterial that by the rules of 
the order the fund was to be paid to 
the member's "family, or as he may di- 
rect," and that the certificate was sur- 
rendered and a new one issued to the 
assignee, according to the constitution. 
Schonfield v. Turner, 75 Tex. 324. 

2. Union Mut. Aid Assoc, v. Mont- 
gomery, 70 Mich. 587; Continental L. 
Ins. Co. V. Palmer, 42 Conn. 64; s. c, 
19 Am. Rep. 530; Washington Ben. 
Endowment Assoc, v. Wood, 4 Mackey 
(D. C.) ig; t>. c, 54 Am. Rep. 251; 
Duvall V. Goodson, 79 Ky. 228; Na- 
tional American Assoc, v. Kirgin, 28 
Mo. App. 80; Thomas v. Leake, 67 
Tex. 469. 

In Holland v. Taylor, iii Ind. 125, 
the court said: "For many, and, indeed, 
for most purposes, mutual benefit asso- 
ciations are insurance companies, and 
the certificates issued by them are poli- 
cies of life insurance governed by the 
rules of law applicable to such policies. 
There are, however, some essential dif- 
ferences usually existing between the 
contracts evidenced by such certificates 
and the ordinary contract of life insur. 
ance. The most usual difference is the 
power, on the part of the assured in 
mutual benefit associations, to change 
the beneficiary. But as in either case 
the rights of the beneficiary are de- 
pendent upon and fixed by the con- 
tract between the assured and the com- 
pany or association, there seems to be 
no reason why the assured should have 
anj- greater power to change the bene- 
ficiary in one case than in the other, 
except as that power may be inherent 
in the nature of the association, or is 
reserved to him by the constitution, or 
by the laws of the association, or by 
the terms of the certificate." See also 
Durian -u. Central Verein, 7 Daly (N. 
Y.) 16S; Lemon t;. PhoenixMut. L. Ins. 
Co., 38 Conn. 301; Johnson v. Van 
Epps, 14 Bradw. (111.) 201; no 111, 
551; Deady v. Bank Clerks' Mut. Ben. 



53 



Beneficiaries. 



MUTUAL INSURANCE. 



Change of. 



The doctrine is now well settled that in the absence of prohib,- 
itory provisions in the by-laws of the society or of a previous de- 
livery of the certificate to the beneficiary, the latter may be 
changed by the member at will.^ To render a second delivery of 
a certificate effective to vest such an interest in the beneficiary as 



Assoc, 17 Jones & Sp. 246; Tennessee 
Lodge V. Ladd, 5 Lea (Tenn.) 716; 
Swift V. Railwaj' etc. Mut. Aid & Ben. 
Assoc, 96 111. 309; Richmond v. John- 
son, 28 Minn. 449. In the last case the 
court said: "Here is not an ordinary 
contract of insurance made between an 
insurance company and another person, 
the rights of the parties to be de- 
termined exclusively by the policy. 
The rights of Charles H. Richmond, 
and of any one claiming through him, 
depended not on the certificate alone, 
but rather on his membership in the 
association; and such rights were de- 
fined and controlled by its constitution 
and by-laws." 

1. Union Mut. Aid Assoc, v. Mont- 
gomery, 70 Mich. 587; Massachusetts 
Catholic Order of Foresters v. Calla- 
han, 146 Mass. 391; Schillinger t^.Boes, 
85 Ky. 357; Masonic Mut. Ben. Soc. v. 
Burkhart, no Ind. 789; Lament v. 
Grand Lodge Iowa Legion of Honor, 
31 Fed. Rep. 177*; Sabin v. Grand 
Lodge Ancient Order United Work- 
men, 8 N Y. Supp. 185*; Milner v. 
Bowman, 119 Ind. 448; Byrne v. Casey 
(Tex.), 8 S. W. Rep. 38; Knights of 
Honor v. Watson, 64 N. H. 577; Brown 
V. Grand Lodge of Iowa (Iowa), 41; N. 
W. Rep. 884; Highland v. Highland, 
109 111. 366; Coleman v. Knights of 
Honor, 18 Mo. App. 189; Splawn v. 
Chew, 60 Tex. 532; Supreme Lodge 
Knights of Honor v. Martin, 13 W. N. 
C. (Pa.) 160; Ireland v. Ireland, 42 
Hun (N. Y.) 212; Holland w. Taylor, 
HI Ind. 121; Raub v. Masonic Mut. 
Relief Assoc, 3 Mackey (D. C.) 68; 
Lamont v. Hotel Men's Ben. Assoc, 
30 Fed. Rep. 817; Supreme Council 
American Legion of Honor v. Perry, 
140 Mass. i;So; Gentrj' v. Supreme 
Lodge Knights of Honor, 23 Fed. Rep. 
718; Supreme Council of the Catholic 
Mut. Ben. Assoc, v. Priest, 46 Mich. 
429; Barton v. Provident Mut. Relief 
Assoc, 63 N. H. 535. 

The change may be made by any act 
clearly signifying such intention in 
the absence of anj' law prescribing the 
manner of eifecting it. Thus, the con- 
stitution of a benefit society provided 
that the funds to which a member was 



entitled in case of death should be paid 
to his widow, or, in case of her death, 
to his children; and that a married 
member might bequeath one-half of 
the fund to either one or all of his 
children, but $500 at least must be de- 
vised to his widow. Deceased desig- 
nated plaintiff as his beneficiary three 
years before his marriage to defendant, 
and four years thereafter died childless. 
It was held that his marriage annulled 
the preceding designation to plaintiff, 
and that his widow was entitled to the 
fund. Sanger v. Rothschild, 2 N. Y. 
Supp. 794. Or the change may be 
brought about by operation of law, as 
where an appointment was made by a 
husband in favor of his wife, in accord- 
ance with the company' 's rule that a 
member might appoint any person as 
beneficiary; but the instrument did not 
designate to whom the money should 
be paid in case the beneficiary died be- 
fore the insured. It was held that the 
appointment was revoked by the death 
of the beneficiary. Rev. Stat. Wis., § 
2347, which empowers a husband to in- 
sure his lil-e in favor of his wife, and 
provides that such insurance shall enure 
to her separate use and that of her 
children, not vesting in the original 
beneficiary the absolute right to the 
money. Given v. Wisconsin Odd 
Fellows' Mut. L. Ins. Co., 71 Wis. 

547- 

Estoppel of Beneficiary. — A first bene- 
ficiary' ma}' be estopped from setting up 
the invalidity of an attempted change, 
as where a member of a beneficiary so- 
ciety makes a change of beneficiaries 
by will, a method not in compliance 
with the contract of insurance, but the 
original beneficiary, his wife, induces 
the assured to rely upon her acquies- 
cence in the provisions of such will, 
and accept benefits under it after his 
decease. Hainer v. Iowa Legion of 
Honor, 78 Iowa 245. 

Insurable Interest. — The transfer of 
a certificate of a mutual benefit society 
to one having no insurable interest, is 
not for that reason invalid, unless such 
transfer is itself a wagering contract. 
McFarland v. Creath, 35 Mo. App. 
112. 



54 



Beneficiaries. 



MUTUAL INSURANCE. 



Change of. 



will require his consent to a change, there must be some suffi- 
cient consideration to support the transaction. ^ 

And the right to change has been held not affected by the facts 
that the first beneficiary paid the assessments of the member and 
that the change was made without his consent.^ 

The laws of the organization regulate and govern the method 
of changing the beneficiary. Whatever formalities they prescribe 
must be observed and complied with. The expression of one 
method impliedly excludes all others.^ However, the authorities 
are not uniform in holding that no change of beneficiaries can be 



1. The rules of an association al- 
lowed the surrender of a certificate and 
the issue of a new one. A son, who 
was a'member of the association, held a 
certificate paj'able to his mother, to 
whom it was delivered. Having mar- 
ried, the son afterwards obtained the 
certificate, and, without his mother's 
knowledge or consent, surrendered it 
for one payable to his wife, to whom he 
delivered it. Afterwards, without the 
knowledge or consent of the wife, he 
obtained the second certificate and 
procured its cancellation, and the issue 
of another payable to the mother. 
Held that, though the certificate was 
delivered as a gift to the wife, it was 
subject to the condition attached that 
assured might at any time surrender it, 
and name another beneficiary, and that 
the wife had no right to the fund. Fol- 
lowing Fisk V. Equitable Aid Union 
(Pa.), II Atl. Rep. 84; Appeal of 
Beatty, 122 Pa. St. 42S. 

2. Fisk V. Equitable Aid Union 
(Pa.), II Atl. Rep. 84. 

In Byrne v. Casey, 70 Tex. 247, it 
■was held that a beneficiary cannot com- 
plain that a bj'-law in existence at the 
issuance of a certificate requiring the 
consent of the beneficiary, was amended 
so as to allow such change and surren- 
der, without the consent of the benefi- 
ciary, the constitution of the society 
providing that the by-laws might be 
amended at any time. 

3. Supreme Council Am. Legion of 
Honor v. Smith (N.J.), 17 Atl. Rep. 
770; Wendt V. Iowa Legion of Honor, 
72 Iowa 682; Hainer v. Iowa Legion of 
Honor, 78 Iowa 245; Olmstead 11. 
Masonic Mutual Ben. Soc, 37 Kan. 93; 
Coleman v. Knights of Honor, 18 
Mo. App. 189. See also Manning 
V. Supreme Lodge Ancient Order 
United Workmen, 86 Ky. 136; Ken- 
tucky Masonic etc. L. Ins. Co. v. 
Miller, 13 Bush (Ky.) 489; Greeno v. 
Greeno, 23 Hun (N. Y. 478; Highland 



V. Highland, 109 111. 366; Elliott v. 
Whedbee, 94 N. Car. 115; Vollman's 
Appeal, 92 Pa. St. 50; Supreme Lodge 
Knights of Honor v. Nairn, 60 Mich. 
44; Ireland v. Ireland, 42 Hun (N. Y.) 
212; Gentry v. Supreme Lodge Knights 
of Honor, 23 Fed. Rep. 718; National 
Mut. Aid Soc. V. Lupoid, loi Pa. St. 
Ill; Renk v. Herman Lodge, 2 Den. 
(N. Y.) 409; Hotel Men's Mut. Ben. 
Assoc. V. Brown, 33 Fed. Rep. 11; 
Eastman v. Provident Mut. Relief 
Assoc. (N. H. 1883), 20 Cent. L. J. 266; 
Harman v. Lewis, 24 Fed. Rep. 97, 530; 
Daniels v. Pratt, 143 Mass. 216; Bayse 
V. Adams, 81 Ky. 36S; Olmstead v. 
Masonic Mut. Ben. Soc, 37 Kan. 93; 
Luhrs V. Luhrs, 6 N. Y. Supp. 51; 
Gladding -u. Gladding, 8 N. Y. Supp. 
880. Holding also that a recital in an 
endorsement made by the secretary on 
a certificate of membership in a mutual 
benefit association, that, at the written 
request of the holder of the certificate, 
the beneficiar3' was changed from his 
brother to his wife, is suflicient evi- 
dence of a compliance with the by-laws 
of the association, which provide that a 
change of beneficiary may be made on 
the written order of the holder of the 
certificate, signed in the presence of 
two witnesses. The records of the as- 
sociation during the life of the member 
are prima facie evidence in respect to 
the rights of the beneficiary, the lat- 
ter having no vested interest in the 
certificate. Bagley v. Grand Lodge 
Ancient Order United Workmen, 131 
Ind. 49S. Where a member execut- 
ed a paper assigning his policy to 
on,e of his creditors as collateral se- 
curity, but no application for a change 
was made to the association, nor was 
the assignment made upon the pre- 
scribed blank, nor had the association 
any notice of it until after the death of 
the member intestate, and both the 
widow and the assignee claimed the 
benefits, it was held that the vfidow 



55 



Beneflciaries. 



MUTUAL INSURANCE. 



Change of. 



made, otherwise than as provided in the laws of the society.' But 
by law provisions regulating the manner of changing beneficiaries 
■are intended only for the convenience of the society, and may be 
waived by it ^ as well as by the original beneficiary.^ 

The same rules apply in determining when a change of bene- 
ficiary is complete as in the case of a transfer of shares in a capi- 
tal stock corporation,* Whenever the member has done the acts 
required of him by the by-laws to effect the change, the neglect 
of the agents of the association to give it effect will not be allowed 
to defeat his object." Nor can they require the performance of 
impossible conditions, though directed in the by-laws.® Though 



was entitled to the fund. Hotel Men's 
Mut. Ben. Assoc, v. Brown, 33 Fed. 
Rep. II. 

1. See Hirsch v. Clark (Iowa), 47 N. 
W. Rep. 78; Splawn v. Chew, 60 Tex. 
532; Manning v. Ancient Order United 
Workmen, 86 K3'. 136; National Mut. 
Aid Soc. V. Lupoid, loi Pa. St. iii; 
Raub V. Masonic Mut. Relief Assoc, 
3 Mackey (D. C.) 68; Block v. Valley 
Mut. Ins. Assoc. (Ark.), 12 S. W. Rep. 
477; Order of Mut. Companions v. 
Griest, 76 Cal. 494; Supreme Council of 
the Catholic Mut. Ben. Assoc, v. Priest, 
46 Mich. 429; Nally v. Nally, 74 Ga. 
669; s. c, 58 Am. Rep. 458. 

2. Southern Tier Masonic Relief 
Assoc. V. Laudenbach, 5 N. Y. Supp. 
901; Mayer r;. Equitable Reserve Fund 
L. Assoc, 2 N. Y. Supp. 79*. And 
where defects in the formalities pre- 
scribed by the law of a society as to a 
change in the designation of a bene- 
ficiary have been waived by the society 
and the beneiit paid, the former benefi- 
ciary' cannot take advantage of such 
defects. Manning v. Ancient Order of 
United Workmen (Ky.), 5 S. W. Rep. 

38,?. 

3. In Marsh v. Supreme Council 
American Legion of Honor, 149 Mass. 
512, it appeared that, by the laws of the 
corporation, a petition for substitution 
was required to have the seal of the 
member's subordinate council, and to 
be attested by the subordinate secre- 
tary. A member delivered his certifi- 
cate and a petition for substitution to 
the subordinate secretary, who, acting 
in collusion Avith the original benefi- 
ciary, the member's wife, delivered the 
certificate to her, and forwarded the 
petition without sealing or attesting it. 
The corporation, notwithstanding these 
omissions, recognized the petition as 
valid, and stood read'y to make the sub- 
stitution if it had received the certifi- 
cate. It was held that the wife would 



not be heard to object that there was 
no valid substitution. Marsh v. Su- 
preme Council American Legion of 
Honor (Mass.), 21 N. E. Rep. 1070. 

A party may be estopped from set- 
ting up the invalidity of the change 
of beneficiary, as wliere the aunt of 
a member having the certificate in 
her possession refused to give it up 
for the purpose of allowing a change to 
be made. Supreme Conclave Royal 
Aldelphia v. Cappella, 41 Fed. Rep. i. 

4. See Stock and Stockholders, 
Am. & Eng. Encyc. of Law. 

5. National American Assoc, v. Kir- 
gin, 28 Mo. App. 80; Grand Lodge 
Ancient Order United Workmen v. 
Child, 70 Mich. 163. 

In Reversing, 6 N. Y. S. 51; Luhrs 
V. Luhrs ,(N. Y.), 25 N. E. Rep. 388. 
The constitution of the benefit society 
whose certificate was in question pro- 
vided that a member might change his 
beneficiary by surrendering his certifi- 
cate to the reporter of his lodge, who 
should forward it to the supreme re- 
porter of the society, and that the lat- 
ter should then cancel it and issue a 
new one, payable to the beneficiary 
designated The certificate was sur- 
rendered in the manner presciibed, 
designating a new beneficiary, but the 
member died while it was in course of 
transmission. The supreme reporter, 
ignorant of this fact, issued a new. cer- 
tificate. Both certificates bore at the 
bottom a printed form of acceptance, 
and the member had signed his name 
thereto on the old one. It was he'.d that 
the right to the new certificate attached 
when the old one was surrendered to 
the home lodge, and the new one, when 
issued, related back to that time, noi- 
withstanding that the acceptance could 
not be signed, and therefore the new 
beneficiary was entitled to the fund. 

6. Isgrjgg V. Schoolev (Ind ), 25 N. 
W. Rep. 151, following Grand Lodge 

56 



Separation 



MUTUAL INSURANCE. 



of Funds. 



the general rule is that the consent of the beneficiary is not re- 
quired' in order to effect a change, it maybe otherwise provided in 
the by-laws.* And, even without such provisions, the interest of 
the beneficiary may become vested so that his consent will be 
necessary.* 

The beneficiaries of a life insurance polic)', who are affected by 
an attempted change of beneficiaries, may avail themselves of 
the failure of the insured to comply with the contract, as well as 
the company with which it was made.* 

V. Sepabation OF Funds— 1. Duties of Directors with Respect to. — 

Independent of statutory provisions and those of the charter 
with respect to the security of policy holders of insurance com- 
panies in the matter of setting apart guaranty and reserve funds, 
such duty is sometimes imposed upon directors in the by-laws ; and 
usually they have discretionary power to provide in this way for 
the safety and protection of certificate and policy holders, while 
insuring by similar segregation of sums derived from assesments, 
the payment of expenses of management, of benefits, relief, disa- 
bility, dues, etc. As long as such separation and application do 
not amount to a diversion of the funds, or a deprivation of any 
right or just claim belonging to a member or creditor, it is but a 
fair and reasonable means for the accomplishment of the objects 



Ancient Order United Workmen v. 
Childs, 70 Micli. 163, in which the facts 
were as follows: Deceased procured a 
certificate making his betrothed the 
beneficiary, but retaining the certificate 
in his possession. She, marrying an- 
other, and the certificate having been 
lost, he made a statement of the loss, 
and applied for a reissue of the certifi- 
cate, making his son the beneficiary.' 
Such application was refused — the rules 
of the organization requiring the 
change to be endorsed on the original 
certificate; but, by the advice of the 
officers of the organization, he at- 
tempted to make the change by giving 
a power of attorney to another to col- 
lect the amount which should accrue 
under the certificate. It was held that 
such acts constituted an equitable 
change of beneficiarj', and that the son 
was entitled to the fund. 

1. Luhrs V. Supreme Lodge Knights 
and Ladies of Honor, 7 N. Y. Supp. 487; 
Supreme Council Catholic Knights v. 
Morrison (R. I.), 17 Atl. Rep. 57. See 
also MasonicMut.Ben. Soc.f.Burkhart, 
no Ind. 189, construingtheact of March 
2, 1877 (Rev. Stat. Ind. 18S1, § 3850), 
which declares certificates to be con- 
tracts between the association and the 
beneficiary, and Wolding that it did not 



change the rule, except to prevent any 
future restrictions in the constitution or 
by-laws of such society upon the con- 
tract or the rights of the parties to 
change the beneficiary. 

2. See Effect Upon Contract of 
Constitution and By-Laws, III, 7, 
supra. 

3. In Butler v. State Mut. L. Assur. 
Co., S N. I . Supp. 411, it was held that 
the beneficiary in a policy of insurance, 
payable to her trustee or his legal rep- 
resentatives, though she has no insura- 
ble interest in the life of the insured, 
acquired a vested interest in the policy 
on its delivery to the trustee, and a 
subsequent alteration so as to permit 
the insured to appoint a new trustee on 
the death of the former is nugatory 
without the consent of the beneficiary. 

4. Wendt V. Iowa Legion of Honor, 
72 Iowa 682, holding also that the fact 
that the insured authorizes a change in 
the beneficiaries and the secretary of 
the company assents and acts as though 
the beneficiaries had been properly 
changed, will not constitute a valid 
change as against the first beneficiaries, 
when the secretary has performed acts 
beyond his authority, and the provis- 
ions of the constitution as to such 
changes have not been complied with. 

57 



Separation MUTUAL INSURANCE. of Funds. 

of the company or association, and is an ordinary feature of in- 
surance book-keeping. 

The separate funds of a mutual benefit association, when there 
are such, are made up in one or the other of two ways : first, by 
assessments levied and collected for the specified object ; second, 
by a percentage of the general periodical assessments, collected 
without special mention of the fund to which it is to be applied. 
The general principles applicable to the duties and powers of di- 
rectors and agents of private corporations control in this con- 
nection. The various provisions of the laws governing these 
matters are also part of the contract of membership, in the con- 
struction of which they must be observed and interpreted.^ 

2. Guaranty and Reserve Funds — (a) Character and Purpose. — 
In most of the States it is required by statute that all insurance 
companies, whether ordinary or mutual, shall provide in cash or 
premium notes, properly secured, or in both, a fund for the se- 
curity of those taking risks. Independent of S'tatute most mu- 
tual insurance companies provide such fund. It is sometimes 
called an absolute, sometimes a guaranty or safety, and at other 
times a reserve fund ;^ but however designated its object is to 
provide against unexpected casualties and losses resulting there- 
from. Most frequently it consists of absolute promissory notes, 
payable within a fixed time. These are usually designated guar- 
anty notes, and evidence a limited liability contingent upon the 
extent of losses to the company. They are usually given by 
members, but not necessarily. Interest may or may not be al- 
lowed to the makers, but whether it is or not their character is 
not altered.* 

(U) Procurance. — Whatever any statutes on the subject re- 
quire to constitute the fund must be procured, whether it be 
cash, municipal bonds^ or the notes of solvent parties. 

1. It is provided hy § 3 of Mass. ch. 73, the reserve fund of a mutual 
Stat. 1885, ch. 183, that all companies benefit association is a trust fund, to be 
then existing for the purposes contem- used only for mortuary benefits, or 
plated by that chapter may exercise otherwise applied as directed by the 
the rights and powers conferred by the by-laws, and, when the association is 
chapter as if reincorporated thereunder, not in a condition to pay the holders of 
Harding t). Littlehale, 150 Mass. 100. death claims by a regular assessment, 

Where the statute under which an they have the first right to be paid out 

association was organized provided of such reserve, before a payment to 

that "no part of the funds collected for the directors of an advance made by 

the payment of death benefits shall be them in good faith to the association, 

applied for any other purpose," it was Wilber v. Torgerson, 24 111. App. 119. 

held that the "advance mortuary as- See also Supreme Council American 

sessments" required of new members Legion of Honor v. Smith, 45 N. J. 

were funds designed for payment of Eq. 466. 

death benefits, and that the use of such 3. See Bouwer v. Hill, i Sandf. (N. 

assessments for the pa^'ment of current Y.) 629; Holbrook v. Basset, 5 Bosw. 

expenses was a violation of law justi- (N. Y.) 147; Brookman f. Metcalf, 5 

fying dissolution. Chicago Mut. L. IBosw. (N. Y.) 429; Hope Mut. F. Ins. 

Indem. Assoc, v. Hunt, 127 111. 257. Co. v. Taylor, 2 Rob. (N. Y.) 278, 

2. Under Starr & C. St. 111., § 129, holding that statutes requiring a guar- 

58 



Ssparation 



MUTUAL INSURANCE. 



of Funds. 



The task of obtaining a statutory guaranty fund usually de- 
volves upon the incorporators and promoters, and precedes or- 
ganization/ and is a condition precedent to the right to transact 
business,* though it is not a prerequisite to corporate exist- 
ence.^ 

When notes are taken for the guaranty fund, they are deemed 
security for the payment of losses, and are not to be resorted to 
except upon the happening of the condition upon which the li- 
ability of the makers depends. The fund thus provided must be 
held, used, and applied as required by statute.* But such notes 
may be assessed if so provided in the by-laws, especially if such 
by-laws do not declare such notes to be absolute funds.* When 
such notes are not given for the double purpose of securing as- 
sessments to pay liabilities and to constitute the guaranty fund, 
but express an absolute liability, they are collectible to the full 



antee fund and prescribing the duties 
of mutual insurance companies with 
respect thereto are valid and binding. 

1. The statutes of Kansas divide 
mutual insurance companies into 
classes, and graduate the extent of their 
authority to do business according to 
the amount of the guarantee fund pro- 
vided by them. The various acts on 
the subject were construed in Kansas 
Home Ins. Co. 7>. Wilder, 43 Kan. 731, 
and it was held under the circumstances 
that a mutual company which had pro- 
vided no fund could not even do busi- 
ness beyond the limits of the State 
Section 4 of chapter" 130 of the Laws of 
18S1; provides that mutual fire insurance 
companies having a guarantee fund of 
$100,000 may do business outside the 
State of Kansas. | 

The system embraces companies or- 
ganized from residents of the State, 
whose business is divided into two 
classes, each of which is to be con- 
ducted separately and independently 
of the other. Laws 1885, ch. 132. 
When any such company has done 
business for a certain length of time, 
and to a sufficient amount, it may 
create a guarantee fund to the amount 
of $25,000, and may then issue policies 
within certain limitations on property 
situate in the State of Kansas; Laws 
1885, ch. 130, §§ 1-4. When such a 
company provides a guarantee fund of 
not less than $50,000, it may advertise 
for and do business in that class of the 
system within certain other limitations. 
Laws 1889, ch. 160. And then when 
the company reaches the stage of hav- 
ing a guarantee fund of $100,000, it 
may do business either in or out of 



the State. Laws 1885, ch. 130, (j 4. 
See also Dwelling-house Ins. Co. v. 
Wilder, 40 Kan. 561; s. c, 26 Am. & 
Eng. Corp. Cas. i n.; State v. Fidelity 
etc. Ins. Co., 39 Minn. 538; s. c, 26 
Am. & Eng. Corp. Cas. 11; State v. 
Thomas (Penn.), 12 S. W, Rep. 1034. 

2. Mor. Priv. Corp. 29. 

3. Harrod f. Hamer, 32 Wis. 162; 
Mor. Priv. Corp. 29. Compare In re 
Schmitt, 10 N. Y. Supp. 583. This 
case called for a construction of Laws 
N. Y. 1889, ch. 520, § 3, which provide, 
with reference to the preliminary or- 
ganization of fraternal beneficiary 
societies, that when among other 
things a sworn statement has been 
filed that at least 200 persons have 
made application in writing for mem- 
bership in such an association, the 
superintendent of insurance shall issue 
a licence, etc. The section further 
provides that when the licence has 
been filed, and when at least 200 per- 
sons have subscribed in writing to be 
beneficiary members, etc., such persons 
shall be constituted a body politic and 
corporate, etc. It was held that it was 
necessary, in order to become a body 
corporate under the law, not only for 
the prescribed 200 persons to make ap- 
plication for membership before the 
issuance of the preliminary licence, but 
they must subscribe in writing to be 
beneficiary members after the issuance 
of the licence. 

4. Iti re California Mut. L. Ins. Co., 
81 Cal.364. 

6. Citizens' Mut. F. Ins. Co. v. Sort- 
well, 10 Allen (Mass.) no; Bell v. 
Shibley, 33 Barb. (N. Y.)6io; Mclntire 
V. Preston, 10 111. 48. 



59 



Separation 



MUTUAL INSURANCE. 



of Fuiiils. 



amount, without any assessment and without exhausting the 
remedies against others liable on such notes. ^ 

(c) Preservation. — Directors hold the guaranty fund in a fiduci- 
ary capacity subject to statutory directions and provisions of the 
by-laws relating thereto. Where it consists in promissory rtotes 
they have no power to surrender such notes in prejudice to the 
rights of members, without a unanimous consent of the latter.* 
Certainly not in violation of a statute. 

(d) Disposition. — The provisions of statutes, charters, and by- 
laws must be consulted for the powers of directors and other offi- 
cers in the use and disposal of the guaranty fund.** When legally 
acquired it cannot be reached or made available for other objects 
than those authorized. When the object has failed or the fund 
is no longer needed or required to be kept intact, it may be dis- 
posed of as general assets.* 

3. Relief and Disability Fund. — This is a fund set apart in anticipa- 
tion of future requirements, to pay sick and disability benefits to 
those entitled to receive the same under the laws of the organi- 
zation.* 

4. Mortuary Fund. — This is an accumulation of assessments or dues 
to meet anticipated death losses.® • 



1. Shawmut Mut. F. Ins Co. v. 
Stevens, 9 Allen (Mass.) 332; Daven- 
port F. Ins. Co. V. Moore, 50 Iowa 
619; Maine Mut. M. Ins. Co. v. Swanton, 
49 Me. 448; Union Ins. Co. w. Greenleaf, 
64 Me. 123; Hope Mut. L. Ins. Co. v. 
Weed, 28 Conn. 51; Hope Mut. L. Ins. 
Co. V. Perkins, 38 N. Y. 404. See Of- 
ficers OF Private Corporations. 
' 2. See Maine Mut. Marine Ins. Co. 
V. Pickering, 66 Me. 130; Brouwer v. 
V. Appleby, i Sandf. (N. Y.) 158. 

It is no defence to such notes that the 
makers never became members or 
policy holders. Brouwer v. Appleby, 
I Sandf. (N. Y.) 158. See Mutual 
Ben. L. Ins. Co. v. Davis, 12 N. Y. 569. 

Like other promissory notes they 
are paj'able absolute, and may be col- 
lected for the purpose of applying the 
proceeds to the payment of losses and 
expenses accruing before the maker 
became a member. Nashua F. Ins. 
Co. V. Moore, 55 N. H. 48. 

The Illinois statute concerning the 
security' in the shape of a guarantee 
fund and its preservation provides that 
associations organized thereunder ma.y 
provide for on accumulation of a sur- 
plus or guarantee fund, which shall 
belong to the association, artd not to 
the officers, "and shall be used only for 
mortuary benefits, without assessment, 
or applied in payment of future assess- 



ments, or otherwise used for the pro- 
motion of the object for which such 
funds are specially provided and set 
apart, and such use shall not be deemed 
or construed to mean a profit received 
by members." The directors having 
created a tontine reserve fund, by re- 
serving 25 per cent, of the assessments 
for death benefits, for the apportion- 
ment of which fund the members were 
divided into classes, the surviving per- 
sistent members of each class to receive 
a distribution at the end of 10 years. 
It was held that such disposition of the 
reserve fund was a direct violation of 
the statute, justifying dissolution. Chi- 
cago Mut. L. Indem. Assoc, v. Hunt, 127 
111. 257. 

3. See Officers of Private Cor- 
porations. 

4. See XI, I, infra. 

5. Where funds have been contrib- 
uted to a relief fund under a law after- 
wards declared invalid, the sums pre- 
viously paid should be refunded. Mur- 
ray V. Buckley, i N. Y. Supp. 247. 

6. The beneficiary of a certificate 
holder has such an interest in the 
mortuary or death fund that, after the 
liability of the association has arisen 
and an action been brought, he is en- 
titled to show that the death fund 
amounts to the agreed sum ; or, if it does 
not, what amount an assessment would 



60 



Title to 



MUTUAL INSURANCE. 



Proceeds. 



5. Endowment Fund. — This is a provision similar to a mortuary 
fund, except that it is to be applied to payment of future maturing 
endowment claims. These may consist either, first, of a lump sum 
payable upon the maturity of the certificate, or, second, of cou- 
pons attached to the certificates to become due in the future, upon 
due compliance by the holders with all the conditions and re- 
quirements of the contract. 

6. Expense Fond. — This is sometimes called the general fund, and 
signifies all the revenues not required to pay losses and benefits, 
and is available for payment of salaries and other expenses of 
carrying on the corporate enterprise and accomplishing the objects 
of the organization. 1 

VI. Title to Psoceeds of Contract. — No question is likely to 
arise concerning the disposition of the money derived from a 
death loss upon a certificate of membership, where such dispo- 
sition is specifically provided for in the certificate or by-laws, and 
the beneficiary named is a person belonging to a class contem- 
plated in the laws and within the powers of the association. 
When classes are pointed out as recipients of the benefits and 
mortuary funds of the society as dependents, widows, orphans, 
relatives, etc., of members, they have a superior claim to that of 
administrators and executors, and it follows that creditors are 
excluded.^ 



realize, and may have an order for the 
examination of an officer of the associ- 
ation, before the trial, to ascertain 
whether he can testify to those facts. 
ChafFey v. Equitable Reserve Fund 
Life Assoc, 2 N. Y. Supp. 4S1. 

1. A provision in the certificates that, 
on a division of the fund, the associa- 
tion should retain reasonable charges 
for its management, does not cover the 
general expenses of the association, ex- 
cept so far as properly chargeable to 
the management of the fund. Burdon 
V. Massachusetts Safety Fund Assoc, 
147 Mass. 360. 

Directors cannot appropriate funds 
set apart as a mortuary fund to the pay- 
ment of current expenses. Chicago Mut. 
L. Indem. Assoc, v. Hunt, 127 111. 257. 

Expenses of Grand and Subordinate 
Lodges. — Courts are frequently called 
upon to adjust the rights of superior 
and subordinate lodges growing out of 
funds derived from assessments. The 
affairs of mutual benefit societies, as has 
been seen, were often conducted by 
complex organizations, consisting of 
grand or supreme and subordinate 
lodges, by the conventional rules of 
which an obligation is imposed upon 
members to pay two kinds of contribu- 
tions: first, assessments levied by the 



superior authority to meet death bene- 
fits; second, an amount periodically for 
the support of the subordinate lodge. 
In other associations not consisting of 
local and grand lodges stated sums are 
to be paid annually or oftener to meet 
the expenses of the organization addi- 
tional to the assessments on death 
claims. The latter contributions are 
usually designated as dues, and gener- 
ally go to make up a fund for the pay- 
ment of expenses. These matters are 
regulated in the constitutions and by- 
laws which, as has been seen, are bind- 
ing on all members. See Internal 
Management and Powers, II, 2, d, 
sufra. 

2. Beckel v. Imperial Council of the 
Order of United Friends, 11 N. Y. 
Supp. 321; Supreme Council American 
Legion of Honor v. Perry, 140 Mass. 
580; Skillings v. Massachusetts Ben. 
Assoc, 146 Mass. 217; National Mut. 
Aid Assoc. V. Gonser, 43 Ohio St. i; 
Daniels v. Pratt, 143 Mass. 216. 

In the second of these cases the court 
said: "If the fund were subject to testa- 
mentary bequest, then, upon the de- 
cease of the member, it might go into 
the hands of his executor, or the ad- 
ministrator of his estate and become 
assets thereof, liable to be swallowed 



61 



Title to 



MUTUAL INSURANCE. 



Proceeds. 



up by the creditors. If there were 
no creditors the member, by his 
will, could divert it from the three 
classes named in the statute. In either 
case, this would defeat the purpose for 
which the fund was raised and held, 
and would be in direct conflict with the 
object of the statute for which the 
association was formed, and would set 
aside the contract entered into between 
the member and the corporation." 
Citing Johnson v. Ames, ii Pick. 
(Mass.) 173, 181; Osgood f. Foster, 5 
Allen (Mass.) 560. 

Failure to Designate. — Where the 
charter of an association provided that, 
upon the decease of any member, "the 
fund to which his family is entitled 
shall be paid as may be designated in 
the application for membership. This 
being rendered impossible, it shall go, 
first to the tuidoiu and infant children," 
and afterwards in the order named. A 
meinber having directed that the bene- 
fit should be paid as he might designate 
in his will, and having died intestate, 
leaving a widow but no infant children, 
it was held that the widow was entitled 
to the fund. Whitehurst v. White- 
hurst, 83 Va. 153. 

A mutual benefit certificate was paj'- 
able to insured's wife E, or to such 
other person as might be entitled to the 
insurance. The by-laws of the associa- 
tion declared that its object was to 
afford financial aid to the widows, or- 
phans and heirs of deceased members, 
or to such other person as might be 
designated by the insured member, and 
that on the death of a member his 
widow or designated heirs should re- 
ceive the insurance. After the death 
of E, the insured married plaintiff, but 
made no change as to the beneficiary. 
It was held, on the death of insured, 
plaintiff and not the children of E was 
entitled to the insurance. Riley v. 
Riley (Wis.), 44 N. W. Rep. 112. See 
Jewell V. Grand Lodge Ancient Order 
United Workmen, 41 Minn. 405. 

DiscLualifled Beneficiary. — Where the 
by-laws provided that "if all the bene- 
ficiaries die during the life of a member, 
and he shall have made no other direc- 
tions, the benefit shall be paid to his 
heirs at law," the benefit will accrue to 
his heirs, though the beneficiary is still 
alive, where such beneficiary is one 
who, under the Missouri laws, is not 
within the class that may be made 
beneficiaries. Keener X). Grand Lodge, 
Ancient Order United Workmen, 38 
Mo. App. 543. 



Death of Beneficiary. — It being pro- 
vided in a policy that, upon the death of 
the insured, the^ amount named should 
be paid "to L, lieirs, administrators or 
assigns," and L, the wife of the in- 
sured, having died before the insured, it 
was held that, there being no children 
of the marriage, the heirs of the hus- 
band were entitled to the benefit of the 
policy, and not the heirs of the wife. 
Michigan Mut. Ben. Assoc, v. Rolfe, 
76 Mich. 146. 

When a Trust Attaches to Fund. — 
Money due on a beneficiary certificate, 
made paj'able to a third person for the 
purpose and vvuth the understanding 
that it shall be applied in payment of 
the debts and funeral expenses of the 
assured, is impressed with a trust to 
that effect, which equity will enforce. 
Boasberg v. Cronan, 7 N. Y. Supp. 5. 

Meaning of "Heirs." — Where a benefit 
certificate was payable to the "heirs" of 
deceased, who left a widow, but no 
children, the word "heirs" will be con- 
strued to mean those designated b^' the 
statute of distribution to take personal 
property (Mansf Dig. Ark., § 2522); 
and, since the widow is thereunder en- 
titled only after all the husband's kin- 
dred, she has nc) claim to the fund as 
against his brothfers and sisters. John- 
son V. Supreme Lodge of Knights of 
Honor (Ark.), 13 S. W. Rep. 794; Ad- 
dison V. New England Commercial 
Travellers' Assoc, 144 Mass. 591. 

A divorced wife is entitled to no 
share of a benefit fund which, by the 
rules of the association, goes to the 
member's heirs, no beneficiary having 
been appointed by him. Schonfield v. 
Turner, 75 Tex. 324. 

Deceased held a certificate in a mu- 
tual life association. Below the names 
of its president and secretary was the 
unsigned statement that "all payments 
or benefits that may accrue or become 
due to the heirs of the person insured 
by virtue of this policy will be paid to 

or lawful heirs." The by -laws 

of the association declare that "its ob- 
ject is to aid and benefit the families of 
deceased members of the brotherhood 
in a simple and substantial manner." 
Deceased designated b}' will his wife 
and children as beneficiaries. It was 
held that the word "heirs," in the above 
form, meant the widow and children of 
deceased, and that the will was a valid 
designation of the beneficiaries. Han- 
nigan i<. Ingraham, 8 N. Y. Supp. 232. 

Money Paid Under Void Policy Under 
a Statute. (Laws Mich. 1887, Act No. 



62 



Title to 



MUTUAL INSURANCE. 



Proceeds. 



Under a statute limiting the beneficiaries to relations of 
members, a designation of his estate by a member is ineffectual.* 
The beneficiaries in such cases derive title to the fund directly 
from the association and not from or through the estate.* 



187, § 16), providing that any contracts 
of insurance on lives of more than 65 
j'ears issued by co-operative and mu- 
tual benefit associations, "organized, 
existing or doing business in this State 
under or by virtue of its provisions, 
"shall be void as to the beneficiary 
therein named, but the amount thereof 
shall be payable to the heirs of the 
member," it was held that the law does 
not apply to a policy issued prior to its 
passage, and the heirs of the assured 
have no claim upon money voluntarily 
paid to the beneficiary of a void policy. 
Smith V. Pinch (Mich.), 45 N. W. Rep. 
183. See also Whitmore v. Supreme 
Lodge Knights and Ladies of Honor, 
100 Mo. 36. 

"Affianced Wife" as Beneficiary. — Un- 
der St. Mass. 18S2, ch. 19s (Pub. St. 
ch. 115), which authorizes corporations 
to assist "the widows, orphans or other 
relations of deceased members, or any 
persons dependent upon deceased 
members," a certificate issued for the 
benefit of a member's "affianced wife," 
who was not dependent on him for 
support, is payable to the member's 
next of kin, on his dying before mar- 
riage. Palmer v. Welch (111.), 23 N. 
E. Rep. 412. 

Meaning of "Family." — Where an ap- 
plicant for membership in a mutual life 
insurance company designates his 
"family" as the beneficiary, and his fam- 
ily consists at that time of himself and 
his wife and daughter, the wife and 
daughter are the beneficiaries; but 
where the daughter dies before her 
father, and the wife is the only member 
of his famil}' who survives him, she 
takes the whole fund, and the daughter's 
children take nothing. Brooklyn Ma- 
sonic Relief Assoc, v. Hanson, 6 N. 
Y. Supp. 161. 

Though the constitution of an asso- 
ciation provides that certificates shall 
be payable only to the families or some 
one dependent on members, yet this 
question can only be raised by the asso- 
ciation, and payment b^' them into 
court of the amount of the certificate 
waives the objection. Knights of 
Honor v. Watson, 64 N. H. 517. 

Word "CliUdren" Entitles a Single 
Cbild. — If a policy does not vest in 



the children at the wife's death, it is 
payable to the children living at the 
husband's death, as a class, and would 
therefore go entirely to such as survived 
the husband, and, in either event, the 
children of a deceased child would have 
no interest in the fund. United States 
Trust Co. V. Mutual Ben. L. Ins. Co., 
IIS N. Y. 152. 

A certificate in a society which paid 
death benefits to the widows and or- 
phans of members, and other persons 
shown to be dependent on members, 
was pavable to the member's widow, 
"for the benefit of herself and the 
children of said member." They had 
one child, and the member also had 
two children by a former marriage, one 
of whom was married, and did not live at 
home at the member's death. It was 
held that the widow and each child 
were severally entitled to one-fourth of 
the amount each. Jackman v. Nelson, 
147 Mass. 300. 

A certificate as issued was payable to 
the member's children generally, with- 
out naming them. Held, that the cer- 
tificate included children born alter its 
issuance, it appearing that one of the 
main objects of the association was to 
provide a fund for the benefit of"the en- 
tire family of a member, and not to re- 
strict it to a portion, and that the 
charter contained no provision allow- 
ing an applicant to designate the bene- 
ficiary. Thomas v. Leake, 67 Tex. 469. 

1. Daniels v. Pratt, 143 Mass. 516. 
But where a certificate issued to a 

member himself as beneficiary ma- 
tures at his death, as well as on his 
being totally disabled, or reaching 70 
years of age, the heirs of such a mem her, 
who made no direction as to the pay- 
ment of the certificate, are entitled to 
collect it, especially where such heirs 
belong to the class of persons to whom 
the member might have directed the 
certificate to be made payable. Peet v. 
Great Camp Knights of Maccabees of 
the World (Mich.), 47 N. W. Rep. 119. 

2. Swift V. San Francisco Stock and 
Exch. Board, 67 Cal. 567; Briggs v. 
Earl, 139 Mass. 473; Felix v. Grand 
Lodge A. O. U. W., 31 Kan. 81; s, c, 
47 Am. Rep. 479; Supreme Lodge 
Knights of Honor v. Nairn, 60 Mich. 



63 



Title to 



MUTUAL INSURANCE. 



Proceeds. 



Courts are very much inclined to construe limitations to de- 
pendents and near relations as provisions in the nature of family 
settlements, and in many of the States are found statutory ex- 
emptions of policies of insurance, and a specified sum for the pur- 
pose of keeping premiums and assessments paid up from the de- 
mands of creditors.^ 



44; Supreme Council of the Catholic 
Mut. Ben. Assoc, v. Firnane, 50 Mich. 
82; Supreme Council of the Catholic 
Mut. Ben. Assoc, v. Priest, 46 Mich. 
429; Durian v. Central Verein, 7 Dalj 
(N. Y.) 168; Richmond w. Johnson, 28 
Minn. 447; Fenn v. Lewis, Si Mo. 259; 
10 Mo. App. 478; Worley v. North- 
western Masonic Aid Assoc, 3 Mc- 
Crary (U. S.) 53; 10 Fed. Rep. 227; 
Schmidt v. Grand Grove, 8 Mo. App. 
601; Bown V. Catholic Mut. Ben. 
Assoc, 33 Hun (N. Y.) 263. 

This rule does not, however, prevent 
a creditor from acquiring by contract a 
lien upon the fund for advances made 
by him to keep up the assessments, 
■where there is no prohibition of such 
an arrangement in the contract or in 
the by-laws brought to the creditor's 
notice. Levy v. Taylor, 66 Tex. 652. 

A creditor who takes out insurance 
certificates amounting to $6,500 on the 
life of his debtor, who owes him $1,000, 
the insurance being taken out in mutual 
aid associations, where the amount to be 
realized depends on the number and 
solvency of the members, and the cred- 
itor paying the mortuary dues and 
assessments, and actually realizing only 
$2,124.82 on the certificates on the 
debtor's death, is entitled to retain the 
balance remaining after deducting the 
debt, interest and expenses. Rittler v. 
Smith, 70 Md. 261. 

Where in a policy the corporation 
agrees to pay "to the executors or ad 
ministrators of said member, in trust, 
however, for, and to be forthwith oaid 
over to, his heirs at law," but in the ap- 
plication, which is expressly made part 
oi the contract, the contract is stated to 
be for the benefit ot the applicant him- 
self, in the absence of anything else to 
show an intention to make the heirs 
beneficiaries, the proceeds of the policy 
must be administered as part ot the es- 
tate of the insured. Harding v. Little- 
hale (Mass.), ,22 N. E. Rep. 703. 

Estoppel as to Fund.^One insured 
in the plaintiff association made a writ- 
ten request for a change in his certifi- 
cate in favor of his father, in the form 
prescribed by the by-laws, stating that 



the original certificate was in the hands 
ofhis aunt, the original beneficiary, and 
that he could not make an actual sur- 
render of such certificate. Before the 
certificate was made out the insured 
died. The aunt had agreed to see that 
this change was made, but subsequently 
refused to do so. It was held that, 
plaintiff having filed a bill of inter- 
pleader and paid the money into the 
court, the aunt was estopped to claim 
that the change of beneficiary' was in- 
valid by reason of the nonsurrender of 
the original certificate, and the failure 
to issue a new one. Supreme Conclave 
Royal Adelphia v. Cappella, 41 Fed. 
Rep. I. 

1. People V. Phelps, 78 111. 147; Swift 
z>. San Francisco Stock & Exch. Board, 
67 Cal. 567; Rhode v. Bank, 52 Iowa 
375, holding that even where the policy 
was payable to the assured, "his ex- 
ecutors, administrators and assigns," 
the wife was entitled to the entire fund 
free from the claims of creditors. The 
same conclusion was reached where the 
policy was payable to "heirs and 
assigns," the death of the insured hav- 
ing occurred before any assignment. 
Mullins V. Thompson,, 51 Tex. 7. See 
also .^tna Nat. Bank v. United States 
L. Ins. Co., 24 Fed. Rep 770; Central 
Bank v. Hume, 3 Mackej' (D. C.) 360; 
s. c, 51 Am. Rep. 780; Levy v. Taylor, 
66 Tex. 652; Stigler v. Stigler, 77 Va. 
173; Stone V. Knickerboclcer L. Ins. 
Co., 52 Ala. 589; Pence v. Makepeace, 
65 Ind. 345; Pullis V. Robinson, 73 Mo. 
202; s. c, 5 Mo. App. 548; s. c, 39 Am. 
Rep. 497; Thompson v. Cundiff, 11 
Bush (Ky.) 567; Felrath v. Schonfield, 
76 Ala. 199; s. c, 52 Am. Rep. 319; 
Cole V. Marple, 98 lU. 58; s. c, 38 Am. 
Dec. 83; Mutual L. Ins. Co. v. Sand- 
felder, 9 Mo. App. 285; Connecticut 
Mut. L. Ins. Co. V. Ryan, 8 Mo. App. 

S3S- 

In Baron v. Brummer, 100 N. Y. 372, 
it was held that creditors cannot com- 
pel an assignment, by'a wife, of a policy 
of insurance upon her husband's life 
eft'ected for her benefit. 

Where it was provided by statute tliat 
the beneficiarv fund should not be liable 



64 



Assessments. MUTUAL INSURANCE. Power of Ofaoers. 

In case of a policy on the life of one person payable to another, 
and the latter dying before the insured, the personal representa- 
tives of the insured are entitled to the insurance money.^ How- 
ever, the laws of the organization usually direct to whom the 
money shall be paid in the event of the beneficiary dying before 
the holder of the certificate, and without a substitution. In the 
absence of such provision and of a substitution there may be a 
lapse, -so that the fund will revert to the society.*^ It has been 
held, however, that in such cases the administrator of the deceased 
member may sue for and recover the insurance money as part 
of his estate.^ 

Where the money has been paid to one not entitled to receiye 
it because not having an insurable interest, the personal repre- 
sentatives of the deceased may sue for and recover it.* 

Vn. Assessments — 1. Power and Duty of Officers in Making. — Di- 
rectors are frequently entrusted by statute with all the powers of 
the corporation, and even when not so authorized are subject to 
only such limitations as are imposed by the membership in the 
constitution and by-laws, provided always they must act impar- 
tially, justly, and in good faith. ^ 

The power of directors of benefit societies to provide for the 
payment of benefits and death losses as they occur, and to exer- 
cise a reasonable discretion in providing for liabilities that are 
reasonably certain to mature in the future, is the same as in 
other corporations vested by their charters and articles with simi- 
lar powers. The extent of the discretionary power of directors 
of benefit societies to accumulate funds has not been definitely 
fixed by the authorities. "^ 

to be seized, taken or appropriated by them, and if one dies before payment of 

any legal or equitable process to pay the benefit his Share goes to his execu- 

any debt of such deceased member, it tor, not to tRe survivor. Union Mut. 

was held that a member has no prop- Aid Assoc, v. Montgomery, 70 Mich. 

erty interest in the beneficiary fund, and 5S7. 

a designation of a beneficiary to receive 2. Eastman z>. Provident Mut. Relief 

the money and pay the member's debts Assoc, 62 N. H. 555; Bacon Ben. Soc. 

is invalid. Reversing 7 N. Y. Supp. 5. & L. Ins., 344. 

Boasberg v. Cronan, 9 N. Y. Supp. 664. 3. Rindge v. New England Mut. 

Acts N. Y. 1840, §§ I, 2, provide Aid Soc, 146 Mass.'286. 

that a wife may insure her husband's 4. Herkimer v. Rice, 27 N. Y. 163. 

life, and if she survives him the insur- See Limitations and their Con- 

ance shall be paid to her free from the struction, 4, b, herein; Insurance, 

plaimsofhls representatives or credit- 11 Am. & Eng. Encyc. of Law 278; 

ors. In case of the death of the wife in Life Insurance, 13 Am. & Eng. 

the husband's life-time, the policy may Encj'C. of Law 629; Designation, 4, 

be made payable after her death to her a, herein; Change of Beneficiary, 

children and to their guardi.ins if under 4, c, herein. 

age. United States Trust Co. f. Mut- 5. See Officers of Private Cor- 

ual Ben. L. Ins. Co., 115 N. Y. 152. porations. 

1. Under a certificate naming two 6. In Kelly v. Troy Fire Ins. Co., 3 

beneficiaries, and, "in case of death of Wis. 254, it was held that directors 

either, full amount to go to the survivor have discretionary power to provide by 

if living, if not living to the heirs of said assessments for anticipated losses, 

member," on the death of the member Where the charter of a mutual insur- 

the shares of both beneficiaries vest in ance company provides that the deposit 
16 C. of L.— ; 65 



Assessments. 



MUTUAL INSURANCE. 



Fowei: and Duty. 



Assessments must be made in strict conformity to the provi- 
sions of the by-laws, and cannot be enforced if made otherwise.^ 

The contract entered into by each member on becoming such 
is that he shall pay assessments only for the legitimate purposes 



note shall be payable in part or in 
whole when the directors deem the 
same requisite for the "payment of 
losses or other expenses," and the re- 
mainder after deducting such payment 
to be relinquished to the signer; that 
every member "shall pay his propor- 
tion of all losses and expenses accruing 
in and to the class in which his prop- 
erty is embraced;" and that the policy 
shall create a lien upon the property 
insured for the security of the deposit 
note," and the cost which may accrue in 
collecting the same," an assessment of 
ninety-five per cent, additional to the 
actual losses in a certain class upon the 
premium notes in such class to "meet 
estimated bad debts, interest, expenses, 
and costs of collection" is illegal. 
York Co. Mut. F. Ins. Co. v. Bowden, 
57 Me. 286. 

An assessment laid by a mutual tire 
insurance company whose by-lawe au- 
thorize their directors to borrow money 
to meet losses, and to include the sums 
thus borrowed, the interest thereon, 
and all necessarj' incidental expenses in 
the next assessment, is not rendered in- 
valid by including reasonable sums for 
interest on money borrowed, and prob- 
able losses from the failure of some of 
the assessed to pay their assessments 
and ten per cent, for collecting assess- 
ments. Jones V. Sisson, 6 Gray (Mass.) 
288. 

In an action to recover insurance 
assessments, held, that, if the assess- 
ments are not much in excess of the 
amount actually required for the pay- 
ment of losses, the presumption is that 
the gross sum was properly laid in 
view of the costs attending the collec- 
tion of numerous small amounts, and 
the probable insolvency of the makers 
of some of the notes. Lehigh Vallej' 
F. Ins. Co. V. Dryfoos (Pa.), 9 Atl. 
Rep. 262. 

In Rosenberger v. Washington Mut. 
F. Ins. Co., 87 Pa. St. 207, it was held 
that an -assessment could no be made 
for anticipated losses in the absence of 
any provision in the laws of the society 
for such a call. 

In other cases it is considered that 
their discretion is limited to an allow- 
ance for expenses and uncollectible as- 



sessments in addition to a sufficient 
amount to cover liabilities. Susque- 
hanna Mut. F. Ins. Co. f. Gackenback, 
19 W. N. C. (Pa.) 287; People's Equit- 
able Mut. F. Ins. Co. V. Babbitt, 7 
Allen (Mass.) 235. 

In Crossman v. Massachusetts Ben. 
Soc, 143 Mass. 435, it was held that 
under the statuteof 1880, ch. 196, section 
3, providing that any beneficiary associa- 
tion may hold, as a death fund belonging 
to the beneficiaries of anticipated de- 
ceased members, an amount not exceed- 
ing one assessment, and that nothing in 
the section shall be held to restrict such 
death fund to less than $10,000; that a 
beneficiary association holding such a 
fund, when a loss occurs, is not obliged 
to pay the loss out of the fund, but may 
make an assessment therefor; and the 
fact that it designates such fund as a 
reserve fund is immaterial. The court 
said: "The idea of holding money as a 
reserve fund imports permanency to 
some extent. The statute does not 
provide that losses bj' death shall be 
paid out of this fund as they occur. 
To do this would soon deplete and de- 
stroy the fund, and defeat the object 
of the statute. Nor does the statute, 
directly or by implication, provide that 
no assessment shall be laid so long as 
there is enough in the reserve fund to 
meet losses as they occur. The officers 
of the association might use a part of 
the fund to pay a loss; they are not 
compelled to do so, and it was within 
their discretion to lay an assessment." 
Of course, the power of the directors 
in making assessments extends no far- 
ther in case of any member or class of 
members than the liability of the latter. 
If the assessment can only be made on 
those who are members of a certain 
class, subject thereto at the time the 
resolution was adopted, the members of 
that class are not liable to assessments 
to pay losses of members in another 
class which occurred during the time 
the^' were such. Miller v. Georgia 
Masonic etc. Co., 57 Ga. 221. See Of- 
ficers OF Private Corporations. 
1. Bates V. Detroit Mut. Ben. Assoc, 
51 Mich. 587; Passenger Conductors' 
L. Ins. Co. V. Birnbaum, 116 Pa. St. 
565; Underwood v. Iowa Legion of 
66 



Assessments. 



MUTUAL INSURANCE. 



Power and Duty. 



of the society, and that these shall be made by the company in 
strict accordance with the requirements of its constitution and by- 
laws, ^ even though some other more equitable method might be 
adopted,^ and by the authority named in the charter or desig- 
nated in the by-laws.* 

If some of the members liable to an assessment be intentionally 
omitted, the assessment is void as to the rest ; although it be 
accompanied by a computation of the liability of those so omit- 
ted and there be an intention to assess them in the future.* 

Where the making of. assessments calls for an exercise of dis- 
cretion, such discretion cannot be delegated.^ 

If the by-laws require that an assessment shall be signed, an 
unsigned assessment is invalid." 

It may be stated generally that rights of members are not 
affected by the nonpayment of assessments not made according 
to the constitution and by-laws.'^ But if the directors have power 



Honor, 66 Iowa 134. See Forfeit- 
ure AND SUSPENSIOISr OF CONTRACT, 

VIII, herein. 

1. Mutual Aid Soc. v. Helburn, 84 
(Ky.) i; Woodfin v. Asheville Mut. 
Ins. Co., 6 Jones L. (N. Car.) 558; Pro- 
tection L. Ins. Co. V. Foote, 79 III. 362; 
Covenant Mut. Ben. Assoc, v. Spies, 
114 111.463. 

The delay of a mutual fire insurance 
company, for a time not unreasonable, 
to make an assessment does not invali- 
date the assessment, notwithstanding 
the provision of Rev. Stat., ch. 37, 
§ 31, that, "if any member shall have a 
just claim on the corporation, founded 
on a policy issued by them, exceeding 
the amount of tKeir existing funds ex- 
clusive of the deposit notes given by 
the members, the directors shall forth- 
with" lay an assessment. Marblehead 
Mut. F. Ins. Co. V. Underwood, 3 Gray 
(Mass.) 210. 

2. Slater Mut. Fire Ins. Co. v. Bar- 
stow, 8 R. I. 343. 

3. Susquehanna Mut. Ins. Co. v. 
Tunkhannock Toy Co., 97 Pa. St. 424; 
s. c, 39 Am. Rep. 816; Agnew v. 
Ancient Order United Workmen, 17 
Mo. App. 254; Bates v. Detroit Mut. 
Ben. Assoc, 51 Mich. 587. 

A meeting of a mutual fire insurance 
company, called "for the purpose of 
making such alterations in the by-laws 
of said company as may be deemed 
necessary, and for the transaction of 
such other business as may come be- 
fore them," cannot, after voting to in- 
crease the number of directors (which 
is not limited by the by-laws), elect the 
additional directors; and an assessment 

67 



or call made at a meeting of the board 
of directors, at which only the addi- 
tional directors so chosen are present, 
is void. People's Mut. Ins. Co. v. 
Westcott, 14 Gray (Mass.) 440. Com- 
pare Carrie v. Mutual Assoc, 4 Hen. 
& M. (Va ) 318; s. c, 4 Am. Dec. 517. 

4. Marblehead Mut. F. Ins. Co. v. 
Hayward, 3 Gray (Mass.) 208; People's 
Equitable Mut. F. Ins. Co. v. Arthur, 7 
Gray (Mass.) i. 

5. Farmers' Mut. F. Ins. Co. v. 
Chase, 56 N. H. 341. 

6. Baiter v. Citizens' Mut. F. Ins. 
Co., 51 Mich. 243. 

7. American Mut. Aid Soc. v. Hel- 
burn, 8 Ky. L. Rep. 627; 2 S. W. Rep. 
495; Underwood v. Iowa Legion of 
Honor, 66 Iowa 134; Passenger Con- 
ductors' L. Ins. Co. V. Birnbaum, 116 
Pa. St. 565; Agnew v. Ancient Order 
United Workmen, 17 Mo. App. 254. ' 

A. by-law of a mutual insurance 
company provide that assessments 
should be made according to the fol- 
lowing classification: First. All mem- 
bers whose policies were in force when 
the assessment was declared should be 
liable to assessment for all losses ad- 
justed, unadjusted and unpaid, and all 
other liabilities then existing against 
the company, subject to abatement as 
thereinafter specified. Second. All 
members whose policies had expired 
at the time of the assessment should, 
nevertheless, be liable to assessment 
for all unpaid lossess and other liabili- 
ties which existed at the time of the 
expiration, fro rata with those 
then in force, the amount thus ascer- 
tained and levied to be deducted from 



AssesBments. 



MUTUAL INSURANCE. 



Power and Duty. 



to fix the rate of assessment, prescribe the manner of making it, 
and authorize the president or committee to make it in accord- 
ance with the prescribed method, such an assessment is just and 
proper. 1 

A resolution by the directors levying a certain percentage on 
all premium notes need not mention the names of all the makers 
of such notes, nor the amount assessed on each. * 

It is otherwise where the amount of the percentage is levied. In 
this case, without specific designation, the assessment is invalid as 
to all.3 

Where several losses have occurred at the same time, or so 
nearly together that the same notes are liable to be assessed 
for the payment of them all, only one assessment is necessary.* 
But an assessment in which a former unpaid assessment is in- 
cluded, but not mentioned, is irregular,^ as is an assessment 
which includes losses that have been paid by previous assessment.** 



the gross amount of the liabilities for 
which such assessment was made, and 
balance of liabilities then remaining to 
be assessed on the policies then in 
force. Held, that the assessment should 
be laid in the first instance on the poli- 
cies in force at the time of the loss, 
whether since expired or not, and that 
policies issued since the loss, and re- 
maining in force at the time of the as- 
sessment should be assessed only for 
the balance if the first part of the as- 
sessment should be insuiBcient. Sus- 
quehanna Mut. F. Ins. Co. V. Stauflfer, 
125 Pa. St. 416; New England Mut. 
Ins. Co. V. Belknap, 9 Cush. (Mass.) 
140; Shaughnessy v. Rensselaer Ins. 
Co., 21 Barb. (N. Y.) 605. 

1. Where it was directed that the 
chairman of a cmnmittee should ex- 
amine the proofs of losses as thej' should 
arrive, and instruct the secretary, if the 
proof were found correct, to issue .no- 
tice of the assessment, such directions 
having been complied with by the chair- 
man and approved \>y him, and an as- 
sessment made in good faith accord- 
ingly, it was held legal and not open to 
the objection that it was made by the 
chairman and not hy the directors. 
Passenger Conductors' L. Ins. Co.- v. 
Birnbaum (Pa.), 116 Pa. St. 565. 

But assessments made by a committee 
of directors is not valid under general 
authority conferred upon directors; 
Monmouth Mut. F. Ins. Co. v. Lowell, 
59 Me. 504; Farmers' Mut. F. Ins. Co. 
V. Chase, 56 N. H. 341. 

The charter of a mutual fire insur- 
ance company provided that the direct- 
ors shall settle and determine losses or 



damages to be paid by the several mem- 
bers of the companj' as their respect- 
ive proportions thereof. A majority 
of the directors voted to assess "a sum 
not exceeding $18,000 to meet the losses 
and expenses incurred from October 
14th, 1867, to October 14th, 1869," and 
appointed a minority thereof a commit- 
tee to make the assessment, who there- 
upon made it in a less sum. Held, that 
the sum of the assessment, not having 
been fixed by a majority of the directors, 
was illegal. Monmouth Mut. F. Ins. 
Co. V. Lowell, 59 Me. 504. 

Under by-laws providing that direct- 
ors shall fix the amount, they cannot 
order that a sum "'not exceeding" a cer- 
tain amount be called. Monmouth 
Miit. F. Ins. Co. k, Lowell, 59 Me. 504. 

2. Lycoming F. Ins. Co. v. Rought, 
97 Pa. St. 415. 

An assessment made by a mutual fire 
insurance company' in good faith, upon 
correct principles and substantially cor- 
rect, is binding, notwithstanding small 
errors, upon a member who is not af- 
fected to a perceptible amount by the 
errors. Marblehead Mut. F. Ins. Co. 
V. Underwood, 3 Gray (Mass.) 210. 

3. St. Lawrence Mut. Ins. Co. v. 
Paige, I Hilt. (N. Y.) 430. 

4. In making the assessment, no dis- 
crimination is to be made between notes 
given when higher rates of insurance 
existed, and those made under reduced 
rates. Shaughnessv v. Rensselaer Ins. 
Co., 21 Barb. (N. Y".) 605. 

6. Campbell v. Adams, 38 Barb. (N. 
Y.) 132. 

6. Cooper v. Shaver, 41 Barb. (N. 
Y.) 151. 



68 



AsBessments. 



MUTUAL INSURANCE. 



Power and Duty. 



A provision that, in making assessments, the members shall 
be classified, is binding on the directors and must be observed. ^ 

Directors have power to make an assessment after assign- 
ment for the benefit of creditors.^ 

Nice questions are often presented where superior lodges in one 
State attempt to raise money by assessments upon the members 
of subordinate lodges in another. The rule is that the superior or 
governing body of a benefit society, incorporated under the laws 
of the State where it does business, has no power to enforce assess- 
ments levied by order of a supreme lodge incorporated under the 
laws of another State.* 

The deposit notes of a mutual insurance company are part of 
its capital, and the directors are bound to call in a sufficient 
amount on them to pay the insured, who are losers by fire.* 



1. Atlantic Mut. F. Ins. Co. v. Moody, 
74 Me. 385. 

2. Schimpf V. Lehigb Valley etc. Ins. 
Co., 86 Pa. St. 373. 

3. Lamphere v. Grand Lodge A. O. 
U. W., 47 Mich. 429. 

The proceeding in this case was by 
mandamus to compel the recognition of 
relator as a member of one of the sub- 
ordinate lodges of the order of which 
respondent was the supreme governing 
authority' in the State of Michigan. As 
such member he stood insured by the 
respondent in the sum of $2,000, pay- 
able on his death, or on his surviving 
for a specified term of years. Upon 
these facts, the court said: "He stands 
suspended by the respondent, and there- 
by loses his insurance for refusing to 
recognize and pay an assessment made 
under the orders of the supreme lodge 
of the order, which is a corporation ex- 
isting under the laws of Kentucky, and 
not subject to this jurisdiction. The 
assessment was made to pay losses on 
risks taken by the order in other States 
and by other State grand lodges. The 
respondent is a Michigan corporation, 
existing under chapter 94 of the Com- 
piled Laws of 1871. The relator is not 
liable to pay the assessment. It is not 
competent for the respondent to subject 
itself or its members to a foreign au- 
thority in this way. There is no law of 
the State permitting it, nor could there 
be any law of the State which would 
subject a corporation created and exist- 
ing under the laws of this State to the 
jurisdiction and control of a body ex- 
isting in another State, and in no man- 
ner under the control of our law. The 
attempt of the respondent to do this is 
an attempt to set aside and ignore the 
very law of its being. A mandamus 



will therefore issue as prayed." See also 
Grand Lodge v. Stepp, 3 Pa. 45. 

4. Rhinehart v. Allegheny Co. Mut. 
Ins. Co., I Pa. St. 359. 

If the necessit3' exists, resort must be 
had to the entire fund of the company. 
White V. Ross, 15 Abb. Pr. (N. Y.) 66; 
Maine Mut. M. Ins. Co. v. Svvanton, 49 
Me. 448. 

The mode of obtaining contributions 
from the makers of deposit notes is to 
assess each liable for the loss and ex- 
penses with a jrra rata assessment of a 
just proportion, and require its payment 
on due notice. This amount is deter- 
mined by the directory, and must be as- 
sessed ratably on the deposit notes of 
those whose policies were in existence 
at the date of the loss. Responsibility 
to contribute to a loss begins when the 
insurance has been effected, and ter- 
minates when the policy expires. 
Planters' Ins. Co. v. Comfort, 50 Miss. 
662. 

Where a loss by fire takes the entire 
funds of the company, the losers have 
an immediate vested interest in the ef- 
fects of the corporation. If the notes 
are insufficient to pay all the losers, 
then the whole amount of the notes and 
effects of the company must be called 
in by the directors and divided fro rata 
among the losers. Rhinehart v. Alle- 
ghany Co. Mut. Ins. Co., I Pa. St. 359. 

A mutual insurance company need 
not proceed, after every loss happening 
to it, to compute the assessment on its 
deposit notes requisite to meet such 
loss, but may adopt a rule of proceed- 
ing that will approximate as near as is 
practicable and reasonable to the above 
method. New England Mut. F. Ins. 
Co. V. Belknap, 9 Cush. (Mass.) 140. 

A mutual insurance company, organ- 



69 



AsseBsments. 



MUTUAL INSURANCE. 



In Collecting. 



Under the law governing mutual insurance companies, the 
power to make assessments upon premium notes is limited by the 
amount of losses sustained and unpaid at the time of making the 
assessment.^ 

An assessment may be made notwithstanding the fact that a 
previous assessment upon a premium note for the same object re- 
mains unenforced.^ 

There are, undoubtedly, cases in which assessments may be 
made by a court of equity in a proceeding to wind up the affairs 
of an association, but such assessments cannot be made by the 
court, where the members ^re free, under the society's laws, to pay 
the assessments or not, and where the authority is conferred only 
upon the directors.^ 

2. In CoUecting.^ — A valid assessment, having been regularly 
made, the most important duty of the ofificers connected with its 
collection is to give notice of the same, which must be according 
to the prescribed method. Until such notice is given, there 
is no liability on the part of a member to pay an assessment.* 



ized under the General Insurance Com- 
panies act of April loth, 1849, maj 
divide its risks into classes, according 
to the degree of hazard, and assess the 
premium notes only for the payment of 
the losses happening in the class to 
which such notes belong. White v. 
Ross, 15 Abb. Pr. (N. Y.) 66. Overrul- 
ing Thomas v. Achilles, 16 Barb. (N. 
Y.) 491. 

An assessment which ignores a di- 
vision into classes of the makers of 
premium notes required by the charter 
to be made is invalid. Atlantic Mut. 
F. Ins. Co. V. Moody, 74 Me. 385. 

Annual Interest Plan. — A note on the 
"annual interest plan," not assessable to 
meet losses until other classes of notes 
have paid, in assessments, an amount 
equal to the interest paid on notes of its 
class, is subject, after interest has fallen 
due and remained wholly unpaid, to as- 
sessment, along with notes of other 
classes, proportionately on the losses 
sustained. Crawford v. Susquehanna 
Mut. F. Ins. Co. (Pa.), 12 Atl. Rep. 844. 
See Susquehanna Mut F. Ins. Co. v. 
Leavy(Pa.), 20 Atl. Rep. 502, 505; hold- 
ing also that the basis of the "schedule 
premium," which was found by multiply- 
ing the amount of insurance by the per- 
centage or rate of the risk, was just and 
equitable. 

1. Sinnissippi Ins. Co. v. Taft, 26 
Ind. 240. 

An assessment laid by a mutual fire 
insurance company is not rendered in- 
valid by the fact that the proportion 
between the cash premiums and the 



deposit notes taken by the company 
varied at different times, as against a 
member who suffered no damage there- 
by. Marblehead Mut. F. Ins. Co. v. 
Underwood, 3 Gray (Mass.) 210. 

Where the by-laws of a mutual in- 
surance society declared that all expired 
policies should be assessable fro rata 
for losses occurring at the time of such 
expiration, an assessment which does 
not include such expired policies is void. 
Tolford V. Church, 66 Mich. 431. 

As to liability of assignee of policy 
to pay assessments, see Francis v. But- 
ler etc. Ins. Co., 7 R. I. 159. 

2. Sands v. Sweet, 44 Barb. (N. Y.) ' 
108; Jackson v. Van Slvke, 44 Barb. 
(N. Y.) n6n. 

Sums voluntarily paid to a mutual 
insurance company by its members, 
upon an assessment which is subse- 
quently adjudged to be illegal, with in- 
terest thereon, may be treated by the 
company as just claims against it, 
within the meaning of Stat. 1863, ch. 
249, and may be included as such in 
making a new assessment. People's 
Mut. Equitable F. Ins. Co., petitioners, 
9 Allen (Mass.) 319. 

3. In re Protection L. Ins. Co., 9 
Biss. (U. S.) 1S8; Duff V. Canadian 
etc. Ins. Co., 6 Ont. App. 238; Mc- 
Ponald V. Ross-Lewin, 29 Hun (N.Y.) 
87; Hill V. Merchants' etc. Ins. Co., 28 
Grant Ch. (Up. Can.) 560. 

4. Peoples. Supreme Council Catho- 
lic Ben. Legion, 10 N. Y. Supp. 24S; 
Payn v. Mut. Relief Soc, 17 Abb. N. 
C. (N. Y) 53; Sinking Springs Mut. 

70 



AssessmenUi. 



MUTUAL INSURANCE. 



In Collecting. 



Nor can good standing be lost for the .nonpayment of an 
assessment, of which the proper notice is not given.* 

The same principles applicable to corporations generally in the 
matter of making and giving notice of assessments, govern benefit 
associations, and the same strictness is required in complying with 
the provisions of constitutions and by-laws as in other business 
corporations organized and conducted for profit.^ 

That the parties may, by agreement, waive the prescribed 
formalities and manner of giving notice and contract for a different 
form of notice is well settled upon the authorities.^ 

The rule that insanity is no excuse for nonpayment of premiums 
or assessments of life insurance policies applies to the payment of 
assessments of benevolent societies.* 

Where the requirement was that notice should be given by 
circular mailed to the party, or verbally, it was held that the 
mere mailing of a circular was insufficient, if it was not, in fact, re- 
ceived.^ 



Ins. Co. V. Hoff, 2 W. N. C. (Pa.) 41; 
Columbia Ins. Co. v. Buckley, 83 Pa. 
St. 298; s. c, 24 Am. Rep. 172; Su- 
preme Lodge Knights of Honor v. 
Johnson, 78 Ind. no; Siebert v. Chosen 
Friends, 23 Mo. App. 268. 
^ 1. Hall -v. Supreme Lodge Knights 
of Honor, 24 Fed. Rep. 450. 

Unless personal notice be required to 
be in writing, verbal notice is sutiicient. 
Jones V. Sisson, 6 Gray (Mass.) 288: 
York Co. Mut. F. Ins."Co. v. Knight, 
48 Me. 75. 

2. As to contents of notice, see 
Miner v. Michigan Mut. Ben. Assoc, 
63 Mich. 338; Siebert v. Chosen 
Friends, 23 Mo. App. 268; Bates v. 
Detroit Mut. Ben. Assoc, 51 Mich. 
587; Supreme Lodge Knights of Hon- 
or V. Johnson, 78 Ind. no; Covenant 
Mut. Ben. Assoc, v. Spies, 114 111. 463. 

A notice of an assessment made by 
the receiver of an insurance company, 
on the premium notes, which was pub- 
lished before it was ascertained by 
carrying out on the extension book 
what amount each member was to paj', 
and consequently contained no infor- 
mation to each member of the amount 
he was to pay, is irregular and defect- 
ive, and will not render members not . 
paying the assessment liable to a suit 
for the amount of the premium note. 
Bangs V. Mcintosh, 23 Barb. (N. Y.) 

591- 

Where the notice of an assessment 
made by a receiver of a mutual insur- 
ance company on the deposit notes 
specified different rates of assessment 
for small notes and large notes, but not 



in any way showing to which class a 
given note belonged, there being no 
evidence of any rule on that subject in 
the charter or by-laws, the notice was 
held inoperative for uncertainty. Bangs 
V. Duckinfield, 18 N. Y. 592. 

As to time of notice, see Trey v. 
Wellington Mut. Ins. Co., 4 Ont. App. 
293; Haskins v. Kentucky Grangers' 
Mut. Ben. Soc, 7 Ky. L. Rep. 371. 
As to the proper authority for the no- 
tice, see Payn X'. Mut. Relief Soc, 17 
Abb. N. C. (N. Y.) 53; Shay v. Na- 
tional Ben. Soc, 7 N. Y. Supp. 287. 
As to service of notice, see Borgraefe 
V. Supreme Lodge Knights of Honor, 
22 Mo. App. 127; Epstein t>. Mut. Aid 
& Ben. L. Ins. Assoc, 28 La. An. 938; 
Weakley v. Northwestern Ben. & Mut. 
Aid Assoc, 19 Bradw. (111.) 327; Gree- 
ley V. Iowa State Ins. Co., 50 Iowa 86; 
Yoe V. B. C. Howard Masonic Ben. 
Assoc, 63 Md. 86. 

A notice erroneous in statement of 
amount due, owing to a miscalculation, 
is not so defective as to prevent a re- 
covery of the amount actually due. 
Thropp V. Susquehanna Mut. F. Ins. 
Co., 125 Pa. St. 427. 

3. Epstein v. Mut. Aid & Ben. L. 
Ins. Assoc, 28 La. An. 938. 

4. Hawkshaw v. Supreme Lodge 
Knights of Honor, 29 Fed. Rep. 770. 

6. Castner v. Farmers' Mut. F. Ins. 
Co.. 50 Mich. 273. 

Where the charter required the notice 
to be published, unless actual personal 
notice were given and received, no col- 
lection could be had on the assessment. 
Castner v. Farmers' Mut. F. Ins. Co., 



71 



Assessments. 



MUTUAL INSURANCE. 



In Collecting. 



giving 



In the absence of any provision as to the manner of 
notice, the notice riiust be personal and actual.* 

The time allowed for the payment of assessments runs from 
the date when notice is delivered or received and not the date 
written in the notice or the day it was mailed ; and the day on 
which the notice was received will be excluded.* 



50 Mich. 273; Greelj v. Iowa etc. Ins. 
Co., 50 Iowa 86; Protection L. Ins. Co. 
V. Palmer, 81 111. 88. 

On the contrary, notice by publica- 
tion, when required, is sufficient with- 
out actual notice. Pennsylvania Train- 
ing School V. Independent Mut. F. Ins. 
Co. (Pa.), 18 Atl. Rep. 392. 

A member cannot take advantage of 
a want of notice after preventing such 
notice by change of residence. Lothrop 
V. Greenfield Stock & Mut. F. Ins. Co., 
2 Allen (Mass.) 82. 

As to notice of assessment by mail, 
see Jackson v. Roberts, 31 N. Y. 304. 

A member of an accident association, 
subject to all the requirements thereof 
and entitled to all the benefits as pro- 
vided in the by-laws, is bound by a by- 
law that the secretary shall give notice 
of assessments and dues by "sending 
all such notices by mail to the last given 
postoffice address of each member, 
which shall be considered a legal no- 
tice," and is in default if he fail to re- 
spond to such a notice whether he ever 
received it or not. Union Mut. Ace. 
Assoc. V. Miller, 26 111. App. 230. 

1. Wachtel v. Noah Widows' & Or- 
phans' Soc, 84 N. Y. 28; s. c, 38 Am. 
Rep. 478; Siebert v. Chosen Friends, 
23 Mo. App. 268; Borgreafe*. Supreme 
Lodge Knights of Honor, 22 Mo. App. 
127; Castner v. Farmers' Mut. F. Ins. 
Co., 50 Mich. 273; Gunther v. New Or- 
leans Cotton Exch. Mut. Aid Assoc, 
45 La. An. 776. 

Giving personal notice of an assess- 
ment laid by a mutual fire insurance 
company is a sufficient publication, 
within the meaning of a provision in 
their charter requiring an assessment 
to be paid "within thirty days after no- 
tice of said assessment shall have been 
published." Jones v. Sisson, 6 Gray 
(Mass.) 288. 

A charter of a mutual insurance com- 
pany made the nonpayment of as- 
sessments within a fixed period a cause 
of forfeiture. In a case in which this 
period had been exceeded and the as- 
sessment not paid, an affidavit of loss 
admitted that the notice of assessment 
had been received shortly after it was 



sent. But the afiidavit was filled out 
by the agent of the company, and the 
insured was not led to suppose that the 
company intended to rely on the pro- 
vision for forfeiture, or that the date of 
receiving the notice was of any impor- 
tance. Held, that in an action on the 
policy he was not estopped by the re- 
cital in his affidavit from showing that, 
although the notice was taken from the 
postoffice soon after it was sent, it had 
not been delivered to him until long 
afterward. Castner v. Farmers' Mut. 
Ins. Co., 50 Mich. 273. 

The charter of a mutual in.surance 
company provided that members should 
be notified of assessments by circular 
or verbally, and that if they did not 
pay within a fixed time they would for- 
feit protection through their polic3'. 
Held, that such personal liability cou'ld 
not attach from merely mailing the no- 
tice, if it was not actually received. 
Castner v. Farmers' Mut. F. Ins. Co., 
50 Mich. 273. 

2. National Mut. Ben. Assoc, v. 
Miller, 8r; Ky. 88; Protection L. Ins. 
Co. -J. Palmer, 81 III. 88; Wetmore v. 
Mut. Aid & Ben. L. Ins. Assoc, 23 
La. An. 770; Pennsylvania Training 
School V. Independent Mut. F. Ins. 
Co. (Pa.), 18 Atl. Rep. 392; Stanley v. 
Northwestern Life Assoc, 36 Fed. Rep. 
75; Taggart v. Phoenix Relief Assoc, 
8 Pa. Co. Ct. Rep. 334. 

Where the charter of a mutual benefit 
association provides that any member 
failing to-pay his assessment in thirty 
days from the date of notice forfeits 
his membership, the time in which pay- 
ment is to be made is not to be com- 
puted from actual date of notice, or 
from the day mailed, but from the time 
at which it would be received by the 
member in the regular mode of carry- 
ing the mail. National Mut. Ben. 
Assoc. V. Miller, 85 Ky. 88. 

Where the by-laws of a mutual 
benefit company give it the right to 
forfeit a policy for non-payment of 
dues by the insured for thirty daj'S, a 
custom of the company to allow an 
extra ten days before enforcing the for- 
feiture does not give the insured the 
72 



Assessments. 



MUTUAL INSURANCE. 



In Collecting^, 



Where notice is required to be given by publication, the time 
runs from the last day on which the notice is published. ^ 

The fact that the company owes the member a less sum 
than that due upon the assessment is no excuse for its nonpay- 
ment.^ Nor is it any defence that enough was due the member 
from the society to offset the assessment, where the amount due 
belongs to a distinct fund of the lodge.** 

The members of subordinate lodges are entitled to notice of 
assessments according to the laws of the order, and are not bound 
to pay without such notice.* 

Payment of assessments not being necessarily a personal duty, 
neither insanity, absence, nor sickness constitute any excuse for 
nonpayment.^ 

Notice to the insured will be proper, although there has been an 
assignment of the policy of which no notice has been given to the 



company. 



6 



right to claim the extra time in all cases 
when proved to be merely a matter of 
favor. Jones v. National Mut. Ben. 
Assoc. (Ky.), 2 S. W. Rep. 447. 

1. Wetmore -v. Mut. Aid & Ben. L. 
Ins. Assoc, 23 La. An. 770. 

But in this as in otiier matters re- 
specting the giving of notice, the parties 
ma3' provide othervifise b^- contract. 
Weakly w- Northwestern Ben. & Mut. 
Aid A'ssoc, 19 Bradw. (111.) 327. Or 
waive the giving of any notice what- 
ever. Hollister v. Quincy Mut. F. Ins. 
Co., 118 Mass. 478. 

2. Hollister v. Quincy Mut. F. Ins. 
Co., 118 Mass. 478. 

3. Ancient Order United Workmen 
V. Moore, i Ky. L. Rep. 93. 

4. Siebert v. Chosen Friends, 23 Mo. 
App. 268; Coyle v. Kentucky Gran- 
gers' Mut. Beii. Assoc. (Ky.), 2 S. W. 
Kep. 676; Agnew v. Ancient Order 
United Workmen, 17 Mo. App. 2154. 

And it is held that personal knowl- 
edge derived otherwise than through a 
regular notice is not binding upon a 
member of such order. In the first 
case above cited, the court said : "There 
are many cases- where a person -nust, 
at his peril, act upon the knowledge of 
a particular fact, however derived, or 
upon such information as should rea- 
sonably put him upon enquiry. But 
vi'herever the special law of the notice 
prescribes the form and manner in 
■which it is to be given, especially when 
a forfeiture may result, the party to be 
affected will, as a general rule, not be 
bound by notice given in any form 
or manner. Thus, when a man's rights 
are to be adjudicated in a court of jus- 



tice, he is entitled to just the form, man- 
ner and time of notice that are directed 
by the statute; otherwise he will not be 
bound by the proceedings, although 
bodily present in the court room, see- 
ing and hearing all that may be done. 
The endorser of a promissory note may 
have a personal knowledge of the 
maker's intention not to pay, or of his 
failure to pay, at maturity'. Yet the 
holder cannot subject him to an3' lia- 
bility without a notice of the dishonor, 
given in the form, time and manner es- 
tablished b}' commercial law and usage. 
. . That contract was visible in 

the printed laws of the association, and 
in her acceptance Of them in her appli- 
cation for membership." 

A similar case was that of Covenant 
Mut. Ben. Assoc, v. Spies, 114 111. 467, 
in which the court said: "It was com- 
petent for the contracting parties to fix 
their own terms in this respect, and, 
having fixed them, thej' must abide by 
them. Thirty daj'S after the date of 
the notice, but not until then, the parties 
having contracted, if the money is not 
paid the certificate shall be void. There 
was, therefore, no obligation to make a 
tender, in the absence of a notice, for 
the purpose of preventing a forfeiture." 

See also Garretson v. Equitable Mut. 
L. Assoc, 74 Iowa 419. 

5. Carpenter v. Centennial Mut. L. 
Assoc, 68 Iowa 453; s. c, 56 Am. Rep. 
855; Hawkshaw v. Supreme Lodge 
Knights of Honor, 29 Fed. Rep. 773; 
Yoe V. B. C. Howard Masonic Mut. 
Ben. Assoc, 63 Md. 86. 

6. Branin v. Mercer Co. Mut. F 
Ins. Co., 28 N. J. L. 92. 

73 



Assessments. 



MUTUAL INSURANCE. 



Action On. 



A release by a mutual fire company of its claims against its in- 
solvent policy holders, on compromise, is no defence to an action 
against another policy holder for his delinquent assessments.^ 
But after the assignee has become a member of the company, 
and assumed the responsibility of membership by giving a new- 
premium note, or otherwise, the notice should be given to him.^ 

In the absence of provisions to the contrary, the company may 
accept in payment either money, or its equivalent in notes, 
checks, or other property.^ 

3. Action On. — The incorporated benefit society is not restricted 
to its remedy by forfeiture and suspension for nonpayment of 
dues and assessments, but may have its appropriate action upon 
the contract,* provided the contract or the constitution and by- 



Defendant, having purchased insured 
property, took an assignment of the 
policy, and sent it to the secretary of 
the company to approve the transfer, 
•which was done by endorsement on the 
policy and entry on the companj-'s 
books; but, owing to a by-law requiring 
the execution of a premium note by the 
new owner before the delivery to him of 
the approved policy*, it was retained for 
the execution of such note, which de- 
fendant informed the company he would 
make on the first convenient oppor- 
tunity. This was neglected, and a loss 
occurred, on which defendant was as- 
sessed as a policy-holder, and, on refu- 
sal to pay, a bill was filed against him 
by the company. Held, that defend- 
ant's property was not insured, and 
the bill should be dismissed. Cran- 
berry Mut. F. Ins. Co. V. Hawk (N. J.), 
14 Atl. Rep. 745. 

1. Crawford v. Susquehanna Mut. F. 
Ins. Co. (Pa.), 12 Atl. Rep. 844. 

Where the constitution of a mutual 
benefit society provides that the finan- 
cial reporter of a subordinate lodge 
shall receive all moneys due the lodge, 
and give a bond for the discharge of his 
duties, and authorizes no other person 
to receive or decline payment of assess- 
ments, and a notice of assessment states 
that assessments must be paid to the 
financial reporter only, a tender of pay- 
ment to the secretary, an officer not 
under bond, and his refusal to accept it 
on the ground that the member is sus- 
pended, are ineffectual to bind the so- 
ciety, though it is customary for the 
secretary and other officers to receive 
such payments. Lazensky v. Supreme 
Lodge Knights of Honor, 3 N. Y. 
Supp. 52. 

2. Bowditch Mut. F. Ins. Co. v. 
Winslow, 3 Gray (Mass.j 415. 



3. Missouri Valley L. Ins. Co. v. 
Dunklee, 16 Kan. 158; Protection L. 
Ins. Co. V. Foote, 79 111. 361 ; Lj'on v. 
Travelers' Ins. Co., 55 Mich. 141; s. c, 
54 Am. Rep. 354; Kline v. National 
Ben. Assoc, iii Ind. 462; s. c, 60 Am. 
Rep. 703. 

As to the manner of making payment 
and the proper officer to receive pay- 
ment, see Manson v. Grand Lodge 
A. O. U. W., 30 Minn, 509. 

4. Planter's Ins. Co. v. Comfort, 50 
Miss. 662; Mutual Ben. L. Ins. Co. v. 
French, 2 Cinn. (Ohio) 321. 

The action is strictly legal. McCul- 
loch 11. Indiana Mut. F. Ins. Co., 8 
Blackf (Ind.) 50. 

Extent of Llatiility on Deposit Note. — 
" The whole amount of the deposit 
note," which the directors of insurance 
companies are hy statute allowed to 
sue for and collect upon default mad'-; in 
the payment of an assessment, means 
only the whole amount of the note as it 
stood reduced by all payments of assess- 
ments which have at any previous time 
been made thereon, and without inter- 
est. Bangs V. Bailey, 37 Barb. (N. Y.) 
630. 

Power of Assignee. — He was held not 
to be by assignment for benefit of cred- 
itors vested with the judicial power of 
the directors to ascertain and apportion 
the amount to be paid on each premium 
note on account of losses by the com- 
pany, nor can he maintain an action 
against the makers of such notes for as- 
sessments which he has levied on ac- 
count of losses, and the expenses of 
levying the assessment. Hurlburt v. 
Carter, 21 Barb. (N. Y.) 221. 

Remedy of Foreign Company. — A pro- 
vision in the charter of a foreign mutual 
fire insurance company, that if any 
member shall neglect to pay any assess- 



74 



Assessments. 



MUTUAL INSURANCE. 



Action On. 



laws do not leave it optional with the member to remain such or 
to withdraw at pleasure.^ To maintain such action the associ- 
ation must show strict compliance with all the provisions of its 
laws in making the assessment and giving notice thereof, and if the 
manner of notifying is not prescribed it must show personal 
notice.^ 



ment upon his deposit note, an action 
may be brouglit for the whole amount 
of the note, and the money thus col- 
lected shall remain in the treasury of 
the company, and the balance thereof, 
after contributing to the payment of 
losses and expenses, be repaid to the 
member at the expiration of his policy, 
is not a penal statute; and a member, 
neglecting to pay an assessment, is lia- 
ble for the full amount of his note in an 
action brought in this commonwealth 
setting forth the note, the laying of the 
assessment, notice thereof to the de- 
fendant, his failure to pay the same, and 
his consequent liability to pay the whole 
note. Tones v. Sisson, 6 Gray (Mass.) 
288. 

Evidence. — In such action the record 
of losses kept by the company is prima 
facie evidence of such losses having 
occurred. People's Mut. Ins. Co. v. 
Allen, 10 Gray (Mass.) 297; West 
Branch Ins. Co. Macklin, 66 Pa. St. 

34- 

In an action by a mutual life insur- 
ance company against a member for 
assessments, where the defendant denies 
having the policy when called upon to 
produce it, the entries in the company's 
books, and the application for the 
policy after the signature thereto has 
been verified by the defendant, are com- 
petent evidence of membership. New 
Era Life Assoc, v. Rossiter, 132 Pa. 
St. 314. 

Where the defendant files an affidavit 
under the Pennsj'lvania act of May ist, 
1876, § 56 (P. L. 53), the plaintfiff is 
bound to prove its claim as if the statu- 
tory provision which makes an assess- 
ment certificate prima facie evidence of 
the validity of the assessment had not 
been enacted. Susquehanna Mut. F. Ins. 
Co. V. Gackenbach, 115 Pa. St. 492. 

In an action by a mutual insurance 
company against one of its members, 
for an assessment made- on a deposit 
note, where the note itself recites the 
receiving of a policy, such recital is 
prima facie evidence that a policy has 
been issued; and it is no ground for a 
new trial that only an abstract of the 
policy was introduced in evidence by 



the companv. New England Mut. F. 
Ins. Co. V. Belknap, 9 Cush. (Mass.) 
140. 

Pleading — Demand. — If the charter of 
a mutual insurance company require the 
directors to publish a notice of the as- 
sessments laid upon the premium notes, 
and that the members shall pay within 
thirty days after, or be liable in a suit 
for the whole of the note, it is not neces- 
sary in such suit specially to aver such 
notice and neglect; it is sufficient to say 
that the defendant, though often re- 
quested, refused, etc., and that the time 
limited by the by-laws is passed. Mis- 
souri S. M. F. etc. Co. V. Spore, 23 Mo. 
26. 

1. The right of election does not ex- 
ist where the member is at liberty to 
either pay the assessment or terminate 
his membership by not paying it. In 
re Protection L. Ins. Co., 9 Biss. (U. 
S.) 188, holding that in such a case no 
action will lie. 

2. Demand and Notice. — Although 
ch.79, Me. Rev. Stat. 1841, requires a de- 
mand before a mutual insurance com- 
pany can maintain an action for an as- 
sessment, yet if the charter subsequent- 
ly enacted provides that such action 
may be brought after notice in a paper, 
the provisions of the charter control 
the statute. York Co. Mut. F. Ins. Co. 
■V. Knight, 48 Me. 75. 

Pleading and Evidence. — In an action 
by a mutual fire insurance company to 
recover an assessment upon a deposit 
note, an averment, in the declaration, 
that the directors "made, agreeably to 
their act of incorporation and by-laws, 
an assessment" on said note, is suffi- 
ciently answered, under St. 1852, ch. 312, 
§ 14, \>y a denial "that any such assess- 
ment has been made as is set forth in 
the plaintifFs declaration," to authorize 
the defendant at the trial to deny the 
validity of the assessment. People's 
Equita'ble Mut. F. Ins. Co. v. Arthur, 
7 Gray (Mass.) 267; holding also that 
the plaintiff could not maintain an ac- 
tion to recover an assessment laid upon 
one class only of holders of their policies 
without proving that they have adopted 
the Stat, of 1849, ch. 107, which author- 



75 



Assessments. 



MUTUAL INSURANCE. 



Action On. 



The defences to an action on an assessment are various. They 
are most frequently based upon some illegality in the assessment 
itself or irregularity in making it/ though there are many others 
which may be set up to defeat the action.* 



ized them to divide their risks into 
classes. 

Presumptions. — Where a promissory 
note, on its face, is payable at such time 
or times as the directors of a mutual 
insurance compan3' may, agreeably to 
their charter and by-laws require, the 
presumption is that it was given and 
taken as and for a premium or deposit 
note, and no recovery can be had on 
such a note unless it has been duly 
assessed. Sands v. St. John, 36 Barb. 
(N. Y.) 628. 

Liability on Note. — The plaintiff asked 
the court to instruct the jury that their 
verdict should be for the interest due on 
the note, the assessments claimed and 
interest thereon from the time they 
were severally payable. The court re- 
fused, and instructed the jury that the 
liability of defendants must be de- 
termined by them from the evidence. 
Held, that this %yas not erroneous, but 
it may be rebutted by showing fraud, 
illegality or gross mistake in making 
the assessments. The onus of rebut- 
ting it is on the defendant, and wide 
latitude should be allowed. People's 
F. Ins. Co. V. Hartshorne, go Pa. St. 

465- 

1. The directors of a mutual in- 
surance company may divide the prop- 
erty insured by them into classes, under 
St. 1849, ch. 104, § 2, from time to time, 
as the policies are issued; and aiter the 
full amount of one hundred thousand 
dollars is subscribed to be insured in 
each class, the policies will take effect, 
and one who becomes insured there- 
after cannot object, in an action to re- 
cover an assessment upon his deposit 
note, that the proceedings were irregu- 
lar. Citizens' Mut. F. Ins. Co. v. Sort- 
well, 8 Allen (Mass.) 217. 

2. Valid Defences. — That assessment 
was grossly excessive. Lehigh Valley 
F. Ins. Co. V. Dryfoos (Pa.), 9 Atl. 
Rep. 262. An unfulfilled parol agree- 
ment of the company to make a loan of 
money in consideration of his execu- 
tion of the note and the damages result- 
ing from a breach of such agreement, or 
that he has rescinded the contract by 
returning the policy and demanding 
the note. Life Assoc, of America v. 
Cravens, 60 Mo. 3S8. That a gross 



76 



mistake has been made or fraud, 
practiced in making the assessment. 
People's F. Ins. Co. -v. Hartshorne, 
90 Pa. St. 465. Or the illegality of 
the policy for noncompliance by a 
foreign company with the laws of 
the State regarding foreign corpora- 
tions. Lamb v. Lamb, 6 Biss. (U. S.) 
420. Or that the note was given for 
an amount prohibited by law. Otis v. 
Harrison, 36 Barb. (N. Y.) 210. That 
there has been a compromise of the 
claim by the directors and a cancella- 
tion of the policy and a surrender of 
the note. Tolford v. Church, 66 Mich. 
431; Wadsworth v. Davis, 13 Ohio St. 
123; York Co. Mut. F. Ins. Co. v. 
Turner, 53 Me. 225; Hyde v. L3'nde, 4 
N. Y. 387; Campbell v. Adams, 38 
Barb. (N. Y.) 132. And see Miner v. 
Judson, 2 Lans. (N. Y.)300. Thatthere 
is no law authorizing such companies 
to do business. Barbor v. Boehm, 21 
Neb. 450. Or any other matter which 
brings in issue the validity of the con- 
tract under which such liabilitj' is 
claimed. 

Insufflcient Defences. — It is no defence 
to an action for an assessment either 
that the company' has not accepted its 
charter or has not otherwise conformed 
to the law in respect to securing corpo- 
rate existence and powers. Traders' 
Mut. F. Ins. Co. V. Stone, 9 Allen 
(Mass.) 483; Appleton Mut. F. Ins. 
Co. V. Jesser, 5 Alle;n (Mass.) 446; 
Citizens' Mut. F. Ins. Co. v. Sortwell, 
8 Allen (Mass.) 217; Sands v. Hill, 42 
Barb. (N. Y.) 651; Cooper v. Shaver, 
41 Barb. (N. Y.) 151; Brouwer v. Ap- 
pleby, I Sandf. (N. Y.) 1^8; Currie -v. 
Mutual Assoc. Soc, 4 Hen. & M. (Va.) 
315; s. c, 4 Am. Dec. 517; Nashua F. 
Ins. Co. V. Moore, 55 N. H. 48; Provi- 
dence F. & M. Ins". Co. V. Murphy, 8 
R. I. 131; Judah -u. American L. S. 
Ins. Co., 4 Ind. 333; Yard v. Pacific 
Mut. Ins. Co., 10 N.J. Eq. 4S0; s. c, 64 
Am. Dec. 467; Hope Mut. etc. Ins. Co. 
V. Beckmann, 47 Mo. 93; Fell v. Mc- 
Henry, 42 Pa. St. 41. Or that the com- 
pany is insolvent. Alliance Mul. Ins. 
Co. V. Swift, 10 Cush. (Mass.) 433; 
Sterling v. Mercantile Mut. Ins. Co., 
32 Pa. St. 75; s. c, 72 Am. Dec. 773; 
Conigland -u. Ins. Co., Phill. Eq. (N. 



Forfeitnre and 



MUTUAL INSURANCE. 



Suspension. 



VIII. Forfeiture and Suspension of Contract — 1. Distinguished 
from Expulsion. — In addition to the actions for the recovery of 
benefits and losses, it often becomes necessary to apply to the 
courts for preventive relief. An injunction is the proper remedy 
to prevent illegal expulsion or deprivation of the benefits of mem- 
bership. It will be shown that if the right to expel a member is 
based upon a violation of disciplinary or doctrinal rules the party 
must exhaust his remedies within the organization. ^ And that 
the only question which cA be rais'ed in such cases is whether 
the lodge or tribunal had jurisdiction, proceeded according to 
its own laws and regulations, and whether the by-laws estab- 
lishing the offence and prescribing the punishment were valid. 
These questions will first be enquired into by a court, and if no 
irregularity or invalidity is found, it will not interfere.^ 

Courts do not exercise visitatorial powers over voluntary asso- 
ciations or their proceedings, except to prevent the violation of 
some law of the State, or to protect or enforce some right already 
acquired.* 



Car.) 341; s. c, 98 Am. Dec 89; Care}' 
V. Nagel, 2 Biss. (U. S.) 244; Vanatta 
V. New Jersey Mut. L. Ins. Co., 31 N. 
J. Eq. 15. Or that a vote was cast for 
the cancellation of all its policies by 
the company, and that the insured did 
not assent to such cancellation. Alli- 
ance Mut. Ins. Co. V. Swift, 10 Cush. 
(Mass.) 433; Sterling v. Mercantile 
Mut. Ins. Co., 32 Pa. St. 75; s. c, 72 
Am. Dec. 773; Conigland v. Insurance 
Co., Phill. Eq. (N. Car.) 341; s. c. 98 
Am. Dec. Sg. Or that there is a want 
of insurable interest. New 'England 
Mut. F. Ins. Co. V. Belknap, 9 Cush. 
(Mass.) 140; Com. v. Massachusetts 
Mut. F. Ins. Co., 112 Mass. 116; Boot 
& Shoe Mut. F. Ins. Co. v. Melrose 
etc. Congregational Soc, 117 Mass. 
igg; Cumings v. Sawyer, 117 Mass. 30: 
Columbia Ins. Co. v. Buckley, 83 Pa. 
St. 293, 298; s. u., 24 Am. Rep. 172. 

When the charter of a mutual insur- 
ance company provides that, in an ac- 
tion for the recovery of assessments, 
the certificate of the secretary shall be 
frima facie evidence of the assessment 
and amount due. Or even, in the ab- 
sence of such provision, if the plaintiff 
proves its claim without showing so 
large an excess in the assessment as in 
itself satisfies the jury of fraud or gross 
mistake, it is entitled to recover. The 
burden of showing fraud or misconduct 
is on the defendant when he relies on 
that as a defence. Susquehanna Mut. 
F. Ins. Co. V. Gackenbach, 115 Pa. St. 
492. 



Where such evidence is supplemented 
by proof that, while the defendant was 
insured, deaths occurred among the 
members, for which he was assessed, 
and notice thereof was given him, it is 
proper, in the absence of any contra- 
dictory testimon}-, to instruct the jury 
to find for the plaintiff. New Era L. 
Assoc. V. Rossiter, 132 Pa. St. 314 

1. In an action on a certificate issued 
by an order, it is not necessary, in order 
to set up a forfeiture, to show that as- 
sured was suspended or expelled from 
such order. Hogins v. Supreme Coun- 
cil of Champions of the Red Cross, 76 
Cal. 109. See VIII, 2, herein. 

2. Van Houten v. Pine, 36 N. J. Eq. 
133; Fritz V. Muck, 62 How. Pr. (N. 
Y.) 69; Olery v. Brown, 51 How. Pr. 
(N. Y.) 92; Loubat v. LeRoy, 11; Abb. 
N. C. (N. Y.) i; Sperrv's Appeal, Ii6 
Pa. St. 391; Riddell v. Harmony F. Co., 
8 Phila. (Pa.) 310; Leech v. Harris, 2 
Brewst. (Pa.) 571; Littleton iy. Black- 
burne, 45 L. J. Ch. 219; 33 L. T. 641; 
Labouchere v. Wharncliffe (Earl), 13 
Ch. Div. 346; 41 L. T. 638; 28 W. R. 
367; Richardson-Gardner v. Free- 
mantle, 24 L. T. 81; 19 W. R. 256; 
Hopkinson v. Exeter (Marquis), 5 L. 
R. Eq. 63; 37 L. J. Ch. 173; 16 W. R. 
266; Dawkins v. Antrobus, 17 Ch. D. 
615; 44 L. T. 557; 2g W. R. 511; Fisher 
V. Keane, 11 Ch. Div. 353; 49 L. J. Ch. 
11; 41 L. T. 335. 

3. Mayor v. Journej'men Stone 
Cutters' Assoc. (N. J.), 20 Atl. Rep. 
492. 

77 



Forfeiture and 



MUTUAL INSURANCE. 



SuBpension. 



But if there is found injustice or capricious disregard of the 
members' rights, or any invalidity in the by-law, upon whose pro- 
visions the proceeding is based, an injunction will be granted to 
restrain the threatened injustice, even though no property rights 
are involved. 

If the expulsion has already occurred without regard to a mem- 
ber's legal rights, a court of law will issue a writ of mandamus 
compelling the officers of an incorporated association to restore 
him.^ 

2. Essentials. — The well settled rule that the enforcement of by- 
laws and ordinances concerning discipline, quahfication, and 
doctrine, although such enforcement results in the expulsion 
of members of other than business corporations and voluntary 
associations,** must always be distinguished from its corollarj' that 
courts do uniformly entertain jurisdiction where such expulsion 
amounts to a forfeiture of property interests.* 

A suspension is in effect a conditional forfeiture, which leaves 
in the suspended member a right similar to that of a mortgagor of 
property to redeem pending foreclosure. A suspension only de- 
prives the member of the benefits of membership. Some afifirma- 



In Gregg v. Massachusetts Med. Soc, 
III Mass. 185; s. c, 15 Am. Rep. 24, it 
appeared that a medical society, incor- 
porated under a charter empowering it 
to expel its members, summoned the 
plaintiffs, who were members, to appear 
before a board of trial, composed of 
members, to answer charges preferred 
by a committee that the plaintiffs had 
violated the by-laws of the society' by 
conduct unworthy honorable physicians 
and members of the society, in practic- 
ing according to a certain exclusive 
theory or dogma, and belonging to an 
association whose purpose was at vari- 
ance with the principles of the society 
and tended to disorganize it. The 
plaintiffs filed a bill in equity against 
the societj', the board of trial and the 
committee preferring charges alleging 
that, it was the defendants' intention to 
expel the plaintiffs only for practicing 
homeopathy; that the body to try them 
was wrongly constituted, and that the 
proceedings were irregular and void. 
It was held, on demurrer, that the court 
had no jurisdiction to interfere by in- 
junction. 

1. Fuller V. Trustees of Academic 
School etc., 6 Conn. ^32; Green v. Afri- 
can M. E. Soc, I S. & R. (Pa.) 264; 
Delacy v. Neuse River Nav. Co., i 
Hawks (N. Car.) 274; s. c.,9 Am. Dec. 
636 (1820); Medical & Surgical Soc. v. 
Weatherly, 75 Ala. 248; Com. v. Penn- 
sylvania Benefit Inst., 2 S. & R. (Pa.) 



141; Roehler v. Mechanics' Aid Soc, 
22 Mich. 86; State v. Georgia Med. 
Soc, 38 Ga. 608; s. c, 95 Am. Dec. 408; 
State V. Cartaret, 40 N. J. L. 295; State 
V. Adams, 44 Mo. 570; Evans v. Phila- 
delphia Club, 50 Pa. St. 107; Manning 
V. San Amtonio Club, 63 Tex. 166; s. 
c, 51 Am. Rep. 639; Doyle v. New 
York Ben. Soc, 3 Hun (N. Y.) 361. 

But before the member will be en- 
titled to the remedy by writ of manda- 
mus he must exhaust the internal 
remedies provided b}' the association's 
constitution and by-laws. Screwmen's 
Ben. Assoc, v. Benson, 76 Tex. 552; s. 
c, 31 Am. & Eng. Corp. Cas. 239 n.; 
German Reformed Church v. Com., 3 
Pa. St. 282; White v. Brownell, 2 Daly 
(N. Y.) 329; Olerv v. Brown, 51 How. 
Pr. (N. Y.)92. ' 

2. See Effect Upon Contract of 
Constitution and By-laws III, 7, 
sufra, and the distinction between for- 
feiture and suspension of contract and 
expulsion just noticed. 

3. Otto V. Journeymen Tailors' P. & 
Ben. Union, 75 Cal. 30S; Thompson v. 
Tammany Soc, 17 Hun (N. Y.) 305; 
Mulroy v. Knights of Honor, 28 Mo. 
App. 463; Pulford V. Fire Department, 
31 Mich. 458; Bauer ti. Samson Lodge, 
102 Ind. 262; Schmidt v. Abe Lincoln 
Lodge, 84 Ky. 490; Supreme Council 
of the Order of Chosen Friends v.Gax- 
rigus, 104 Ind. 133; s. c, 54 Am. Rep. 
298; Olery v. Brown, 51 How. Pr. (N 

78 



Forfeiture and 



MUTUAL INSURANCE. 



Snspension. 



tive action by the society or lodge is necessary to a forfeiture, and 
the by-laws under whose operation the member is deprived of bene- 
fits are not self-executing to the extent of expelling the member 
and depriving him of all rights growing out of his connection as 
a member. Nor is the mere act of the secretary, in marking the 
member's account suspended, sufficient.'^ 

But such by-law or provision in the contract may undoubtedly 
operate, to deprive the delinquent member of the benefits of the 
contract of insurance contained in his contract of membership, 
without other action than the proper entry in the books of the 
society, and perhaps without the latter.* 



Y.) 92; Austin V. Searing, 16 N. Y. 
Ii2;s. c, 6g Am. Dec. 665; Wiiite f . 
Brownell, 2 Daly (N. Y.) 329. 

1. Millard v. Supreme Council 
American Legion of Honor, 81 Cal. 
340; People TJ. Theatrical Mechanical 
Assoc, S N. Y. Supp. 675; Knights of 
Honor v. Wickser (Tex.), 12 S. W. 
Rep. 175; Columbia Ins. Co. v. Buckley, 
83 Pa. St. 293; s. c, 24 Am. Rep. 172; 
Olmstead v. Farmers' Mut. F. Ins. Co., 
50 Mich. 200; Scheu v. Grand Lodge 
Independent Foresters, 17 Fed. Rep. 
214; Suppel V. Iowa State Ins. Co., j8 
Iowa 29. 

In Grand Lodge A. O. U. W. v. 
Brand (Neb.), 46 N. W. Rep. 95, it was 
held that the fact that u. member of a 
mutual benefit association was addicted 
to the use of intoxicating liquors, con- 
trary' to the rules of the order, cannot 
be set up after his death in defence to 
an action on the certificate issued to 
to him, and conditioned to be void un- 
less he complied with all the rules of 
the order, where no objection was made 
and no forfeiture declared on this ac- 
count during his lifetime, though the 
members of the association knew or 
might easily have ascertained his habits; 
also that the fact that a motion was 
made to suspend a member of a mutual 
benefit association, when the presiding 
officer refused to put the motion to a 
vote, on the ground that it was con- 
trary to the rules, did not constitute 
such a suspension as would defeat the 
right of recovery of the beneficiarj' in 
his certificate after his death. 

2. Rood V. Railway Passenger & 
Freight Conductors' Mut. Ben. Assoc. 
31 Fed. Rep. 62; Blanchard v. Atlantic 
Ins. Co., 33 N. H. 9. 

Although a condition be attached to 
a policy, declaring it void on a failure 
to pay an assessment upon a premium 
note within a specified time, yet the 

79 



policy does not thereby become ifso 
facto void. The company may, at its 
option, declare the policy cancelled, 
and notify the delinquent, or may waive 
its right of avoidance. In the former 
case the premium note is not liable to 
assessment for the payment of future 
losses. In the latter the contract rela- 
tion is not wholly dissolved, but the 
protection of the policy is suspended 
until the default of nonpaj'ment is re- 
moved. Columbia Ins. Co. v. Buckley, 
83 Pa. St. 293; s. c, 24 Am. Rep. 172; 
Union Mut. F. Ins. Co. v. Spaulding, 61 
Mich. 77; Akers v. Hite, 94 Pa. St. 395; 
s. c, 39 Am. Dec. 792; Sans v. Hill, 55 
N. Y. 18; New Hampshire Ins. Co. v. 
Rand, 24 N. H. 42S. Though there may 
have been a total loss of property in- 
sured prior to the expiration of the 
terra covered by the policy. Swamscott 
Machine Co. v. Partridge, 25 N. H. 
369; New Hampshire F. Ins. Co. v. 
Rand, 24 N. H. 428; Thropp v. Susque- 
hanna Mut. F. Ins. Co., 12c; Pa. St. 
427; Bangs. w. Skidmore, 21 N. Y. 136. 
See also Mayer v. Attorney General, 32 
N.J. Eq. 815. 

A policy of insurance provided that 
the insured should pay such sums as 
might be assessed by the directors of 
the companj', and that upon failure to 
pay an assessment, after notice duly 
given, the directors might annul the 
policy. Notice of an assessment was 
mailed to plaintiff", who at that time was 
out of the country. Upon receipt of 
notice, however, plaintiff' forwarded 
the amount, but the company refused 
to receive it, the policy having been 
previously annulled. Held, that upon 
the loss of the property by fire, plaintiff 
could not recover. Greeley v. Iowa 
State Ins. Co., 50 Iowa 86. 

Violation of Temperance Pledge. — 
Where the by-laws provided that "any 
member violating his pledge shall be by 



Forfeiture and 



MUTUAL INSURANCE. 



Suspension. 



As regards the mere matter of membership, a party must first 
exhaust the remedies provided by the organization itself, such as 
appeahng from a subordinate to a superior body.' 

But it is otherwise where the action of the society, if allowed to 
stand, would amount to a forfeiture of property rights, and it is im- 
material whether such rights are evidenced by a distinct instru- 
ment, or are inseparably connected with the contract of member- 
ship. This observation is peculiarly applicable to a certificate of 
membership in a benefit society, entitling a member to pecuniary 
benefits and his family to insurance money at his death. These the 
courts will not allow to be forfeited for a mere infraction of a by- 
law regulating personal conduct, except in a very strong and clear 
case.* 

In this respect there is no difference between incorporated and 
voluntary associations, and when in a case affecting the lattei a 
court has acquired jurisdiction, it will follow, and enforce, as far 
as applicable, the rules applying to incorporated bodies of the 
same character.* 

But even property rights may be lost as a result of expulsion, 
under and in accordance with rules that are reasonable, and in 



the very act suspended," and that "the 
suspension shall work deprivation of 
all rights and claims of membership 
pending trial," and the application for 
membership contained a stipulation 
that suspension or expulsion should for- 
feit the rights to benefits, it was held 
that a violation of the pledge by a mem- 
ber, although not known to the society 
until after his death, of itself, and with- 
out trial on charges therefor, worked a 
forfeiture of the right of the bene- 
ficiaries under his certificate of mem- 
bership to a pa3'ment agreed to be 
made on his deatli, provided -he was at 
the time a member in good standing. 
Smith ti. Knights of Father Mathew, 36 
Mo. App. 184. See also Supreme Coun- 
cil Royal Templars of Temperance v. 
Curd, III Hi. 284. Compare Supreme 
Lodge Ancient Order United Work- 
men V. Zuhlke, 30 111. App, 98, affirmed; 
129 111. 298, holding that notice will be 
required, although the rules of the so- 
ciety do not require notice. 

Expulsion by Directors. — Where the 
charter of a club, incorporated for pat- 
riotic and social purposes, gives the 
power to expel members, "the causes 
which . justify their expulsion, and the 
manner of effecting the . same," to be 
regulated by the b^'-laws which the 
corporation is empowered to make, a 
by-law is valid which gives a board of 
directors the power to expel a member 
"for acts or conduct which they may 



deem disorderly' or injurious to the in- 
terests or hostile to the objects of" the 
club, with right of appeal to a meeting 
of the club. Com. i>. Union League of 
Philadelphia (Pa.), 19 Atl. Rep. 
1030. 

1. Lafond v. Deems, 8 Abb. N. C. 
(N. Y.) 344; 81 N. Y. soS; White v. 
Brownell, 4 Abb. Pr., N. S. (N. Y.) 
162; s. c, 2 Daly (N. Y.) 329; Harring- 
ton V. Workingmen's Ben. Assoc, 70 
Ga. 340; Carlen v. Drury, i Ves. & B. 
154; Poultney v. Bachmann, 31 Hun (N. 
Y.) 49; Grosvenor v. United Society of 
Believers, 118 Mass. 78; Karcher v. 
Supreme Lodge Knights of Honor, 137 
Mass. 368; Chamberlain v. Lincoln, 129 
Mass. 70; Dolan v. Court Good Samari- 
tan, 128 Mass. 437. 

2. Supreme Council of the Order of 
Chosen Friends v. Garrigus, 104 Ind. 
133; s. c, 54 Am. Rep. 298; Bauer v. 
Samson Lodge, 102 Ind. 262; Austin 
V. Searing, 16 N. Y. 112; s. c, 69 
Am. Dec. 665; Pulford v. Fire Depart- 
ment, 31 Mich. 457; Mulroy v. Knights 
of Honor, 28 Mo. App. 463: Olery D. 
Brow.n, 51 How. Pr. (N. Y.) 92. 

As to the power of a new association 
succeeding an old one to enforce for- 
feiture for nonpyment of assessments 
made by the latter prior to its quitting 
business, see Abe Lincoln Mut. L. & 
Ace. Soc. V. Miller, 23 111. App. 341. 

3. Otto V. Journeymen Tailors' P. & 
Ben. Union, 75 Cal. 308. 

80 



Forfeiture and 



MUTUAL INSURANCE. 



Suspension. 



compliance with proper or prescribed rules of procedure, or by 
virtue of the express terrns of a contract. Where time of pay- 
ment of assessments is made of the essence of contracts, those 
made by a mutual insurance company with its members stand 
upon no better or different footing than those of other companies, 
and the adjudications upon the latter are applicable;' One who 
has become a member of such society is bound by a by-law mak- 
ing a transfer, by a mortgage or otherwise, avoid the policy, un- 
less ratified by the directors.* 

A verbal agreement at the time a policy was taken, that the 
date of payment of the premium should be extended beyond the 
time expressed, is of no avail in such a case.^ 

In most societies, however, it is provided in the by-laws form- 
ing a part of every contract, that the mere non-payment of an as- 
sessment or due shall operate to suspend or forfeit the contract. 
The parties have a right so to stipulate,^ and 'having done so in 
clear and express terms, the courts will give the contract due 
force and effect.* 



1. See Mobile L. Ins. Co. v. Pruett, 
74 Ala. 487; Catoir v. American L. 
Ins. etc. Co., 33 N. J. L. 487; Klein v. 
New York L. Ins. Co., 104 U.S. 88; 
Shaw V. Berkshire L. Ins. Co. 103 
Mass. 254; Ayer v. New England Mut. 
L. Ins. Co., 109 Mass. 430; Williams v. 
Washington L. Ins. Co., 31 Iowa 541; 
Alabama Gold L. Ins. Co. v. Garmany, 
74 Ga. 51; Security L. Ins. etc. Co. v. 
Gober, 50 Ga. 404; Gaterman f. Ameri- 
can L. ins. Co., I Mo. App. 300; Frank- 
lin L. Ins. Co. V. Sefton, 53 Ind. 3S0; 
Akers v. Hite, 94 Pa. St. 394; s. u., 39 
Am. Dec. 792. 

2. Pfister V. Gerwig, 122 Ind. 567. 

A provision that, upon failure to paj' 
an assessment within 30 days from 
notice, the certificate shall be void, in 
the absence of any qualifying expres- 
sions, cannot be construed to render the 
policy only voidable at the option of 
the association. Bosworth v. Western 
Mut. Aid Soc, 75 Iowa 5S2. 

3. Mutual L. Ins. Co. v. Girard L. 
Ins. Co., 100 Pa. St. 172. 

4. Rood V. Railway Passenger & 
Freight Conductors' Mut. Ben. Assoc, 
31 Fed. Rep. 62; Borgraefe v. Supreme 
Lodge Knights of Honor, 22 Mo. App. 
127, 142. 

In the second case, the court said: 
"There is, in view of this provision, a 
plain distinction between this case and 
cases which have arisen under the con- 
stating instruments of mutual insu- 
rance companies, and other benevolent 
orders of this character, where the gov- 

lO C. of L.— 6 81 



erning statute recites that for the non- 
payment of dues, or other named de- 
linquenc}', the member may be sus- 
pended by the lodge or other judicatory. 
Here the member is not suspended 
until the lodge or other designated 
judicatory- exercises the power of sus- 
pension. The reason is that, whatever 
right the lodge or the order may have 
against the member for an infraction of 
its rules, must be sought in conformity 
with the laws and rules of the order. 
The remedy therein prescribed must be 
exhausted before resort can be had to 
the judicial courts. But where, as in 
this case, the suspension attaches bv 
operation of law upon an event named 
and the member dies before the sus- 
pension has been set aside in conform- 
itj with the rules of the order, there can 
be no recovery upon his benefit certifi- 
cate." 

See also Olmstead v. Farmers' Mut. 
F. Ins. Co., 50 Mich. 200; Chamberlain 
V. Lincoln, 129 Mass. 70; Yoe v. B. C. 
Howard Masonic Mut. Ben. Assoc, 63 
Md. 86; Madeira r. Merchants' Ex- 
change Mut. Ben. Soc, 16 Fed. Rep. 
749; 5 McCrary (U. S.) 25S; Rood v. 
Railway Passengers' & Freight Con- 
ductors' Mut. Ben. Assoc, 31 Fed. Rep. 
62; Illinois Masons' Ben. Soc v. Bald- 
win, 86 111. 479; McDonald v. Ross- 
Lewin, 29 Hun (N. Y.) 87; American 
Mut. Aid Soc. V. Kilburn, 7 Ky. L. 
Rep. 750; Blanchard v. Atlantic Ins. 
Co., 33 N. H. 9. 

It is sometimes provided in the rules 



Forfeiture and 



MUTUAL INSURANCE. 



Suspension. 



. It is well settled that no forfeiture can be established, except 
for a violation of the precise conditions laid down.' 

If the constitution and by-laws of the lodge give the member the 
right of appeal, and some affirmative proceeding resulting in his 
expulsion or suspension has been consummated, he must exercise 
his right of appeal before resorting for redress to the courts, but 
it must appear that the lodge or society had jurisdiction, and had 
given notice and proceeded in a regular manner.^ 

Where the forfeiture is claimed under by-laws and proceedings 
under their provisions, they must appear reasonable, and the pro- 
ceedings of the society must be in strict accordance with them, 



and regulations governing the relative 
rights and duties of grand and subor- 
dinate lodges, that the latter shall be- 
come suspended from the enjoyment 
of benefits for neglect to pay dues and 
assessments. In case of suspension 
under such provisions, the members of 
the subordinate lodge become reinstated 
without act or proceeding on their part 
"upon the restoration of their lodge to 
its former right and charter. If, during 
such suspension, a member died, the 
right of the beneficiary to recover the 
insurance money is not lost but restored 
■with the restoration of the lodge. Su- 
preme Lodge Knights of Honor v. 
Abbott, S2 Ind. i. 

And such a power reserved to the 
directors in the by-lavjrs is equally bind- 
ing and enforceable. 

Coles V. Iowa State Mut. Ins. Co., 
iS Iowa 425. 

1. Bates 'v. Detroit Mut. Ben. Assoc, 
51 Mich. 587. 

A member expelled or suspended 
■without notice or trial, has a cause of 
action against the association. Ludo- 
"wiski V. Polish Roman Catholic etc. 
Ben. Soc, 2g Mo. App. 337. 

2. Chamberlain t;. Lincoln, 129 Mass. 
7o;'Mulroy f. Knights of Honor, 28 
Mo. App. 463; Karcher v. Supreme 
Lodge Knights of Honor, 137 Mass. 
368. 

When an assessment is not made in 
accordance with the charter upon a de- 
posit note, the failure to pay such an 
assessment does not work a forfeiture 
of the policy under the charter. Plant- 
ers' Ins. Co. V. Comfort, 50 Miss. 662. 

A vote by a company that, if the 
assessments upon its premium notes 
should not be punctually paid, the in- 
surances previously made should be 
suspended, is of no validity', unless as- 
sented to by the insured. New Eng- 
land Mut. F. Ins. Co. V. Butler, 34 Me. 



451; Hamilton Mut. Ins. Co. v. Hobart, 
2 Gray (Mass.) 543; Rosenberger v. 
Washington Mut. F. Ins. Co., 87 Pa. 
St. 207; Bradford v. Union etc. Ins. 
Co. (C. C. P. Pa.), lolns. L. J. 551; 
Van Slyke v. Trampealeau Co. Farm- 
ers' Mut. F, Ins. Co., 48 Wis. 683; 
Great Falls Mut. F. Ins. Co. v. Harvey, 
45 N. H. 292. 

A refusal to pay an illegal assess- 
ment for thirty days after demand will 
not render void a policy of insurance 
issued by a mutual insurance company, 
or defeat a subsequent assessment upon 
the same, although the by-laws author- 
ize the directors to terminate the same 
in case of a refusal to pay assessments, 
and the directors, when making the as- 
sessments, voted that any policy, the 
holder of -which should refuse to pay 
any assessment for thirty days after a 
demand on him, shall be void. Peoples' 
Mut. Equitable F. Ins. Co. Petition- 
ers, 9 Allen (Mass.) 319. 

Evidence that the delinquent was 
absent at the time the notice was 
mailed to his residence rebuts the pre- 
sumption of its receipt by him which 
■would ordinarily arise from the mailing 
of a notice to his place of residence.' 
People V. Theatrical Mechanical As- 
soc, SN. Y. S. 67s. 

Where the constitution of a mutual 
benefit association provided that when 
an assessment was made the secretary' 
should at once notify the members, and 
each member should pay the same 
within thirty days from the date of the 
notice under penalty of forfeiture, the 
omission to pay an assessment levied 
thirty-four days before the member's 
death was held to be no cause for forfeit- 
ure when the notice was not g'.ven un- 
til thirteen daj's after levy of the assess- 
ment. Knight V. Supreme Council 
Order of Chosen Friends, 6 N. Y. 
Supp. 427. 

8a 



Forfeiture and MUTUAL INSURANCE. Suspension. 

upon due notice to the accused, and an opportunity on his part 
to defend and explain his conduct.^ 

Without these, the attempt of a lodge or its officers to suspend 
a member or a lodge of members, is a usurpation which cannot af- 
fect the rights or legal status of any one.^ 

It is evident that, after the liability under a contract of member- 
ship to pay insurance money has become fixed and executed by 
the death of the member, the right of forfeiture is at an end.^ 

A certificate is not forfeited by failure to pay the monthly dues 
for expenses after the association has stopped business.* Pro- 
visions providing for forfeitures and penalties are construed 
strictly.^ 

3. Waiver. — Just what acts and circumstances will in all cases 
be construed as a waiver of the right to declare the rights of 
membership in a benefit society forfeited or suspended, has not 
been, and, in the nature of the case, cannot be definitely declared. 
It is, however, a generally recognized principle, that whatever 
clearly indicates an intention on the part of the society, acting 
through its duly appointed agents, not to take an advantage of a 
member's default, or amounts to a recognition of his claim to the 
continuing rights of membership, will bind the company and re- 
lieve the member from the consequences of his default. The re- 
ceipt of payment of premiums or assessments, after breach of con- 
ditions, is the most common form of waiver, and will ordinarily be 
held to estop the insurer from alleging such breach as a ground of 

1. Mullen V. Dorchester Mut. F. Ins. Lodge Knights of Honor, 22 Mo. App. 

Co., 121 Mass. 171; Grand Lodge An- 127; Diligent Fire Co. v. Com., 75 Pa. 

cient Order United Worlimen v. Brand St. 291; Wachtel v. Noah Widows and 

(Neb.), 46 N. W. 95; Bacon Ben. Soc. Orphans' Soc, 84 N. Y. 28; s. t., 9 

& L. Ins. Co., § 116: Daly (N. Y.)476;s.c., 38 Am.Rep.478. 

Where a certificate provided that 2. Hall v. Supreme Lodge Knights 

assessments should be payable within ol' Honor, 24 Fed. Rep. 450. 

thirtj' days of the date of notice, pa)'- 3. Olmstead v. Farmers' Mut. F. 

ment within such thirty days was held Ins. Co., 50 Mich. 200. And if by the 

sufficient to keep the certificate in force, terms of the certificate itself a member's 

though made by the beneficiary after rights stand suspended b)' nonpayment 

the death of the member. Bankers' & of dues, he cannot be reinstated to his 

Merchants' Mut. L. Assoc, w. Stapp, rights bj' his beneficiarj'. 

77 Tex. 517. A member failed to pay certain dues 

Under by-laws providing that notice required by the rules, and was accord- 
shall be given of asses.sment due before ingly suspended. After his death, the 
there shall be a forfeiture, notice to a beneficiary paid the dues to the collec- 
member put in the mail, directed to tor of the local society, but the receipt 
him, but not shown to have reached thereof was not authorized by the soci- 
him, is insufficient to support a for- etj' itself. It was held that the society 
feiture. McCorkle v. Texas Ben. As- was not liable on said certificate, 
soc , 71 Tex. 149. Brown v. Grand Council Northwestern 

Without a provision in the by-laws Legion of Honor (Iowa), 46 N. W. 

for the purpose of expiration or suspen- 1086. 

sion for nonpayment of dues, it must be 4. Burdon v. Massachusetts Safety 

upon trial and after due notice. Com. Fund Assoc, 147 Mass. 360. 

V. Pennsylvania Beneficial Inst., 2 S. & 5. American Mut. Aid. Soc. -v. Hel- 

R. (Pa.) 141; Com. v. German Soc, 15 burn, 85 Ky. i; Mandego v. Centennial 

Pa. St. 251; Borgraefe v. Supreme Mut. L. Assoc, 64 Iowa 134. 

83 



Forfeiture and 



MUTUAL INSURANCE, 



Suspension. 



forfeiture.^ It is in most cases a question of fact for the jury.'* 
This presumption of waiver may be abutted.^ 

A long continued habit of receiving overdue assessments with- 
out question, may, in some cases, estop a company from insisting: 
upon a forfeiture for nonpayment at a specified time.* 



1. Mershon v. National Ins. Co., 34 
Iowa 87; Lasher v. Northwestern Nat. 
Ins. Co., 55 How. Pr. (N. Y.) 31S; 
McDonald v. Supreme Council, Order 
of Chosen Friends, 78 Cal. 49; Martin 
V. New Jersey Ins. Co., 44 N. J. L. 273; 
Phoenix Ins. Co. v. Lansing, 15 Neb. 
494; Pomeroy v. Rock3' Mountain Ir.s. 
& Sar. Inst., 9 Colo. 295; s. c, 59 Am. 
Rep. 144; Viele v. Germania Ins. Co., 
26 Iowa 55; s. c, 96 Am. Dec. 83; 
Tobin V. Western Mut. Aid. Soc, 72 
Iowa 261 ; Kline v. National Ben. As- 
soc, III Ind. 4O2; s. c, 60 Am. Rep. 

703- 

It has been held sufficient to estop 
the society from insisting upon a for- 
feiture, if it received assessments after 
the death of a member. Millard v. Su- 
preme Council American Legion of 
Honor, 81 Cal. 340. 

In Erdmann v. Mutual Ins. Co., 44 
Wis. 376, the assessments had been re- 
ceived b3' a local lodge, and it was held 
that the retention of them by the su- 
preme court lodge, with knowledge of 
the facts, waived the forfeiture. See 
also Illinois Masons' Ben. Soc. v. 
Baldwin, 86 111. 479. 

If after a first notice the right accrues 
to the company to consider the policy 
forfeited, the forfeiture will be waived 
by giving a second notice. Shay v. 
National Ben. Soc, 7 N. Y. S. Nat. 
Rep. 287. 

An assessment by defendant on the 
premium notes of persons to "whom it 
has issued policies, being payable abso- 
lutely, whether such oolicies have been 
forfeited or not, an acceptance of such 
a paj'men'.. after a loss of which the 
company has notice, is not a waiver of 
an^' forfeiture. Joliffe v. Madison Mut. 
Ins. Co., 39 Wis. in; s. c, 20 Am. 

Rep- 3,'^- 

In the same case it was held that in 
the absence of a stipulation making the 
whole premium due on default as above 
described, acceptance of the whole after 
default, with notice of a loss which oc- 
curred during the default, is a waiver of 
the condition, and makes the insurer 
liable, such acceptance being inconsist- 
ent with any claim that the risk was 
suspended when the loss occurred. 



But the court remarked: "If suchi 
condition had further provided that m 
case of default the whole cash premium, 
should be considered earned, accept- 
ance of the whole amount by the in- 
surer after a loss would not be a waiver 
of the condition, or make the insurer 
liable for such loss; although such pay- 
ment during the life of the policy 
would revive the risk from the date of 
the payment as to all of the insured 
property then remaining." 

2. Kenyon v. Knights Templar etc- 
M. Mut. Aid Assoc. (N. Y.), 25 N. E- 
Rep. 299; United Brethren Mut. Aid 
Soc. V. Swartz (Pa.), 13 Atl. Rep. 769. 

In Bosworth v. Western Mut. Aid 
Soc, 75 Iowa 582, the court having- 
found that no general custom existed of 
waiving such defaults by accepting as - 
sessments after the prescribed time, and 
it not appearing that deceased had any 
knowledge of such custom, if an^-, ex 
cept that it had been waived in a few 
instances as to himself, refused to dis- 
turb the finding that there had been a- 
waiver as against the evidence. 

In an action on a policy, the plain- 
tiffs contended that this assess- 
ment was invalid, and that their policy 
was not forfeited nor suspended bv 
their neglect to pay it. The court took 
an opposite view, and directed a verdict 
for the defendants. Held, that this 
was an error. Rosenberger v. Wash- 
ington Mut. F. Ins. Co., 87 Pa. St. 207 

3. As where the company expressly 
asserted its right to insist upon the for- 
feiture. Northwestern Mut. L. Ins. 
Co. V. Amerman, 119 111. -^29. 

4. Stylowi7. Wisconsin Odd Fellows 
Mut. L. Ins. Co., 69 Wis. 224, where 
the right had been waived in sixty 
three previous similar instances. 

A certificate issued by a mutual ben- 
efit association provided that it should' 
be void unless assessments were paid 
within ten daj'S after receiving notice 
but it appeared that it was the habit ot 
the association to receive payments 
from the assured if made within s\xty 
da3'S from the time of notice, and the- 
certificate remained uncancelled at the 
death of the insured. The association 
was held estopped to claim a forfeiture- 



84 



Forfeitnre and 



MUTUAL INSURANCE. 



Suepension. 



But to make out a case based upon such a usage, it must be 
shown not only that assessments were habitually received when 
overdue, which would be a waiver in each case, but also that the 
insurer intended to waive the future prompt payment of assess- 
ments as one of the conditions of the contract, or that the as- 
sured had reasonable ground for believing, and did believe, that 
the condition had been waived.^ There is some question as to 
the authority of a subordinate lodge to waive the positive re- 
quirements of the by-laws of the order.* The receipt of an as- 
sessment through mistake is no waiver.* Nor does the receipt 
of an assessment constitute a waiver where the insurer had no 
knowledge of the breach of the condition.* 

The same is true where, at the time of the receipt of the pre- 
mium or assessment, it is stated that it is received on condition 



because the assessments were not paid 
within the ten days. Odd Fellows' 
jSIut. Aid Assoc, v. Sweetser (Ind.), 19 
N. E. Rep. 722*. 

1. Grossman v. Massachusetts Ben. 
Assoc, 143 Mass. 435. 

Where a mutual insurance company 
imposes forfeiture in case a loss occurs 
while its assessments are still unpaid, 
but its local agent receives past due as- 
sessments with knowledge of a loss and 
forwards them to the company, without 
notifying them of it, and they receive 
them, and two or three weeks after- 
ward order the loss to be paid when ad- 
justed, thej' cannot afterward refuse 
payment on the ground of the dela^' in 
paying the assessments, since they 
have waived that by receiving them 
when overdue and ordering payment. 
Farmers' Mut. F. Ins. Co. v. Bowen, 40 
Mich, 147; Sands v. Hill, 42 Barb. (N. 
Y.) 651; Viall V. Genessee Mut. Ins. 
Co., 19 Barb. (N. Y.) 440; Insurance 
Co. V. Slockbower, 26 Pa. St. 199; Tut- 
tle V. Robinson, 33 N. H. 104. 

But in Diehl v. Adams Co. Mut. Ins. 
Co., 58 Pa. St. 443; s. c, 98 Am. Dec. 
302, after a policy had been forfeited by 
alterations in violation of the by-laws, 
the company passed a resolution direct- 
ing an assessment on all policies "in 
force at this date;" the treasurer as- 
sessed the forfeited policy, and the as- 
sured paid the assessment. It was held 
not a waiver of the forfeiture. 

2. Swett V. Citizens' Mut. R. Soc, 
78 Me. 541; Miller v. Hillsborough 
Mut. F. Assoc, 42 N.J. Eq. 458; Bor- 
graefe v. Supreme Lodge Knights of 
Honor, 22 Mo. App. 127; 26 Mo. App. 
218. But see Manning ■?'. Ancient Or- 
der United Workmen, 86 Ky. 136; Erd- 



mann v. Wisconsin etc. Ins. Co., 44 
Wis. 376; Splawn v. Chew, 60 Tex. 

S3-- 

In Hoffman v. Supreme Council of 
American Legion of Honor, 35 Fed. 
Rep. 252, defendant having, through its 
duly appointed officers, after deceased 
had been suspended for delinquency in 
his assessments, continued to make 
calls on him for subsequent dues, and 
to receive the amounts called for, and 
the local council having, on full heaiing 
of deceased's application for reinstate- 
ment, though not acting in all respects 
in conformity with the rules of the in- 
stitution, granted such application, de- 
fendant was held estopped to deny that 
deceased was a member in good stand- 
ing. 

3. Elliott V. Lycoming etc. Ins. Co., 
66 Pa. St. 22; s. c, 5 Ain. Rep. 323. 

Nor will the omission to pay an as- 
sessment work a forfeiture when the 
association has received from the mem- 
ber on assessments for losses occurring 
before he joined the association more 
than the amount of such unpaid assess- 
ment. Knight 7'. Supreme Council 
Order of Chosen Friends, 6 N. Y. 
Supp. 427. 

4. R6bertson v. Metropolitan L. Ins. 
Co., 88 N. Y. 541; Gilbert v. North 
American F. Ins. Co., 23 Wend. (N. 
Y.) 43; s. c, 35 Am. Dec. 543. 

Where the custom of the company 
has been to receive overdue premiums 
only with the understanding that the 
insured was in good health, the re- 
ceipt of an assessment, when he was 
not in good health, without knowledge 
of the fact, has been held not to amount 
to a waiver. Lewis v. Phoenix Mut. L. 
Ins. Co., 44 Conn. 73. 



85 



Forfeiture and 



MUTUAL INSURANCE. 



Suspension. 



that the insured is in good health. ^ But a waiver may be estab- 
lished in such case, if further assessments and dues are paid and 
accepted, without any enquiry into the condition of the mem- 
ber's health.^ 

While it is true that a waiver will sometimes be presumed from 
an habitual usage or habit of receiving overdue assessments, yet 
one instance of the kind in the case of another member cannot 
be set up to bind the company in the particular case.^ 

It is not always necessary, to constitute a waiver of the forfeiture, 
that an assessment be actually paid. If, after a default, it recog- 
nizes the continued existence of the policy by notifying the assured 
that he is liable to suspension unless he at once pays, a waiver 
may be inferred.* But the mere sending of assessment notices 
to members who have been suspended for nonpayment of assess- 
ments, for the purpose of inviting reinstatement, will not of itself 
amount to a waiver of the forfeiture." 

A clause in a certificate denying to agents the power to make, 
alter, or discharge contracts, waive forfeitures, or extend credits. 



In case overdue assessments have 
been received by the company in ignor- 
ance of facts which, if known, would 
void the policy, the company may, 
upon discovering the facts, tender a 
return of the money and insist upon 
the forfeiture. Diboll v. yEtna L. Ins. 
Co., 32 La. An. 179; Union Mut. L. 
Ins. Co. V. McMillen, 24 Ohio St. 
67. 

But a forfeiture may be waived in 
such case by failure to offer to return 
the unpaid premium note, as required 
by the contract, although notice of the 
forfeiture was given. Johnson v. 
Southern Mut. L. Ins. Co., 79 Ky. 

403- 

1. Grossman xt. Massachusetts Ben. 
Assoc, 143 Mass. 435; Rockwell v. 
Mutual L. Ins. Co., 27 Wis. 372; 20 
Wis. 335; 21 Wis. 548; Unsell v. Hart- 
ford L. & A. Ins. Co., 32 Fed. Rep. 443. 

2. Rice 11. New England Mut. Aid 
Soc, 146 Mass. 248. 

3. Mobile L. Ins. Co. v. Pruett, 74 
Ala. 487; Mutual L. Ins. Co. v. Girard 
L. Ins. Co., 100 Pa St. 172; Marston v. 
Massachusetts L. Ins. Co., 59 N. H. 92; 
Thompson v. Knickerbocker L. Ins. 
Co., 2 Woods (U. S.) 547; 104 U. S. 
252. 

4. Olmstead f. Farmers' Mut. Ins. 
Co., 50 Mich. 200. 

5. Mutual Protection L. Ins. Co. v. 
Laury, 84 Pa. St. 43. 

If the amount of the premium is 
subject to reduction, by the allowance 
of dividends, and the company has 



been in the habit of notifying the as- 
sured of the amount of these dividends 
and of the balance to be paid in cash, and 
fails to give the customary notice, it is 
estopped from claiming forfeiture for 
nonpayment. Manhattan L. Ins. Co. 
■u. Smith, 44 Ohio St. 156; s. c, 58 Am. 
Rep. 806; Phoenix Mut. L. Ins. Co. v. 
Doster, 106 U. S. 30. 

The receipt of many assessments 
overdue, where the member was re- 
quired at the time of payment to fur- 
nish certificates of health which were 
not furnished, does not amount to a 
waiver, or if the payment be extended 
as an act of kindness to a certain time, 
and be not made within that time. To 
constitute a waiver the insured must be 
induced by the company to do or omit 
to do some act which he would not 
otherwise have done or omitted. Illi- 
nois Masons' Ben. Soc. v. Baldwin, 86 
111. 479. See also generally, Equitable 
Ins. Co. V. McCrea, 8 Lea (Tenn.) 541; 
Steele f. St. Louis etc. L. Ins. Co., 3 
Mo. App. 207; Washoe Tool Mfg. Co. 
V. Hibernia F. Ins. Co., 66 N. Y. 613; 
7 Hun (N. Y.) 74; Fowler v. Metro- 
politan L. Ins. Co., 41 Hun (N. Y.) 
357; Appleton v. Phcenix Mut. L. Ins. 
Co., 59 N. H. 541; s. c, 147 Am. Rep. 
220; Protection L. Ins. Co. v. Foote, 79 
111. 361; Southern L. Ins. Co. v. Mc- 
Cain, 96 U. S. 84; Insurance Co, v. 
Tullidge, 39 Ohio St. 240; Home L. 
Ins. Co. V. Pierce, 75 111. 426; Piedmont 
etc. Ins. Co. v. Fitzgerald, W. & W. 
(Tex.) 784. 



86 



ForfeitTire and 



MUTUAL INSURANCE. 



Snepension. 



does not apply to the secretary and general manager of the com- 
pany.^ 

4. Payment of Arrearages and Reinstatement. — Under provisions 
for the reinstatement of suspended members, the acts required be- 
ing done, no proceeding or further recognition is necessary on the 
part of the society. The performance of the acts required is in 
itself effective for that purpose.* 

The decision of the officers of a society on the sufficiency of an 
excuse for neglect to pay assessments is not conclusive. It is re- 
viewable in the courts.^ 

It is immaterial that the restoration of a member's name to the 
list of members was not made until after his death.* Unless it is 
provided that the mere fact of being in arrears shall operate to 
suspend a member, some action on the part of the society is neces- 



1. Bankers & Merchants' Mut. L. 
Assoc. V. Stapp, 77 Tex. 517. 

In Odd Fellows' Mut. Aid Assoc, v. 
Sweitser (Ind.), 19 N. E. Rep. 722, the 
assured made several payments about 
a month after the assessments were due, 
and paid the last assessment about two 
months after due at the home office of 
the association, when he was informed 
by the general manager that he was de- 
linquent in still another assessment, 
and that an assessment would fall due 
on the following day, but no forfeiture 
was suggested. It appeared that no- 
tices of assessments stated that the 
agents were not authorized to extend 
the time of payment of assessments, 
and that any delay beyond the stipu- 
lated time would be at the risk of the 
member. The assured died about 
twenty days after his last payment, 
leaving two assessments unpaid, and 
the policy remaining uncancelled. It 
was held that it was for the jury to say 
whether there had not been a waiver of 
any forfeiture. 

The statement of the secretary of a 
mutual benefit association to the in- 
sured that he need not pay his dues 
until certain charges then pending 
against him, which, if true, made the 
policy forfeitable, were disposed of, is 
not ultra vires, but binds the company. 
Jones V. National Mut. Ben. Assoc. 
(Ky.), 2 S. W. Rep. 447. 

Where a member, relying on the 
promise of the manager to draw on 
him for assessments, and, being misled 
by the fact that such drafts have been 
twice made on him, is suspended for 
nonpayment of an assessment for 
which no draft was made, and cannot 
be reinstated because his health has be- 



come impaired, the association is es- 
topped to insist on a forfeiture. Mc- 
Corkle V. Texas Ben. Assoc, 71 Tex. 
149. 

2. Manson v. Grand Lodge Ancient 
Order United Workmen, 30 Minn. 

509- 

A by-law of defendant, that if a 
member is in arrftars when taken sick 
he shall not be entitled, by paj'ing up 
such arrearages, to benefits during such 
sickness, is not waived by the accept- 
ance of arrearages from a member, he 
being in arrears at beginning of sick- 
ness. Nagel V. Glasburger, 10 N. Y, 
Supp. 503. 

3. Dennis v. Massachusetts Ben. 
Assoc, 120 N. Y. 496. 

4. Connelly v. Masonic Mut. Ben. 
Assoc. (Conn.), 20 Atl. Rep. 671; Den- 
nis V. Massachusetts Ben. Assoc, 120 
N. Y. 496. 

In the first case it appeared that the 
power of a local lodge of Masons to 
suspend a member for nonpayment of 
dues was given by the constitution of 
the district lodge, which provided that 
certain notice should be gvien the de- 
linquent member, and gave the district 
deputy grand master power to deter- 
mine when a member alleged to have 
been illegally suspended should be re- 
stored. It was held that the decision 
of such deputy, affirmed by the grand 
master, that the notice given was not 
proper, and that the member should be 
restored, followed by a vote of the local 
lodge restoring his name as of the date 
of the alleged suspension, when made 
in good faith, bound the association, 
membership in which being contingent 
on continued membership in a local 
lodge. • 



87 



Bemedies and Defences MUTUAL INSURANCE. on CertifloateB. 

sary.^ A member may have paid all arrearages, and may still stand 
suspended for noncompliance with other provisions of the by- 
laws.^ Where the constitution and by-laws give a member the 
right to appeal from the order of suspension for nonpayment of 
assessments, he is not required to pay such assessments until an 
order of reversal is actually made.* 

IX. Remedies and Defences on Certificates. — ^The certificates 
of membership differ greatly in form, but being in effect policies 
of life insurance, the fundamental principles of practice and plead- 
ings which govern actions upon other insurance policies are ap- 
plicable.* 

The federal courts have jurisdiction of actions upon contracts 
between benefit societies and their members, as in other cases, and 
the same circumstances of residence, etc., will warrant the parties 
in removing a case brought in a State court to the federal 
courts." 

Where the policy issued by a mutual insurance company pro- 
vides that the only action maintainable on the policy shall be to 
compel the association to levy the assessments agreed upon, and 
where its conditions are such that if a levy were ordered by the 
court, the association will only be liable for the sum collected, and 
the only mode of enforcing the policy in the first instance is by a 
suit in equity, such a provision in the policy is valid.® 

In many States a different rule prevails ; and although a suit in 
equity may be maintained to compel the company to levy an as- 
sessment and pay the proceeds to the beneficiary, still it is not 
necessary for the policy holder to resort to it, for, when the in- 
surance company refuses to make an assessment, it violates its 

1. McDonald v. Supreme Council the enterprise was abandoned before 

Order of Cfiosen Friends, 78 Cal. 49. anj risks were taken or business dont^ 

In this case the bj-laws of a mutual see Brown v. Stoerkel, 74 Mich. 267. 

benelit society provided that a member, 2. Grossman v. Massachusetts Ben. 

failing to pay an assessment in thirty Assoc, 143 Mass. 435. 

days, should be suspended by the society 3, Vivar v. Supreme Lodge oi 

at its next meeting. By the relief laws, Knights of Pythias (N. J.), 20 Atl. Rep. 

any member so delinquent should for- 36. 

feit all rights to benefits under the rehef 4. Elkhart Mut. Aid etc. Assoc, v. 

fund laws, and should be reported sus- Houghton, 98 Ind. 149; s. c, 53 Am. 

pended from the "beneficiary member- Rep. 514. 

ship," and should be declared suspended 5. Home Ins. Co. v. Morse, 20 Wall, 

b^' the society, and should stand sus- (U. S ) 445. 

pended until payment of arrearages 6. Eggjeston v. Centennial Mut. L. 

and compliance with the other laws Assoc, of Iowa, 19 Fed. Rep. 201; dis- 

governing reinstatements. It was held tinguishing Lueder i). Hartford L. & 

that compliance with "the other laws A. Ins. Co., 12 Fed. Rep. 465. 

governing reinstatements, which re- In the case of Eggleston v. Centen- 

quired a new certificate of the medical nial Mut. L. Assoc, of Iowa, 19 Fed. 

officer, and a re-election, was not ne- Rep. 201, the policj' sued on contained 

cessary where no suspension had been the following clause: "The only action 

declared by the society. maintainable on this policy shall be to 

As to the status of parties and the compel the association to levy the as- 

nature of their title to a fund made up sessments herein agreed upon, an'd if a 

of advance dues and assessments, where levy is ordered by the court, the asso- 



Bemedies and Befenoea MUTUAL INSURANCE. 



on Certificates. 



contract, and becomes liable to the beneficiary for damages 
caused by such violation. Such damages, like all damages for 
breaches of contract, can be recovered by an action at law.''^ 



ciation shall be liable under this policy 
only for the sum collected under an as- 
sessment so made." The court said: 
"It is not for the court to comment on 
the wisdom or follj of such contracts. 
If parties choose to enter into them 
they are bound by their terms, in the 
absence of fraud, unless they are contra 
hovos mores. There is nothing to void 
the agreement the parties voluntarily 
entered into, and hence this court ad- 
heres to the decision heretofore made 
in this case — viz., that redress must be 
sought in equity' alone." 

An action at law upon a certificate of 
mutual insurance cannot reach ques- 
tions outside of such certificate, so as to 
enable the plaintiff to recover benefits 
otherivise tka7i as specified in the cer- 
tificate. Bailey v. Mut. Ben. Assoc. 
(Iowa;, 27 N. W. Rep. 770; Tobin v. 
Western Mut. Aid Soc, 72 Iowa 261; 
Ranis Bargerz). Union Mut. Aid Assoc, 
72 Iowa 191. If the recovery desired is 
outside the contract contained in the cer- 
tificate, in an action at law, only nom- 
inal damages can be recovered. New- 
man IK Covenant Mut. Ben. Assoc. 
(Iowa), 33 N. W. Rep. 662. 

In Nerskin -v. Northwestern En- 
dowment Assoc, of Minn. 30 Minn. 
406, the court said: "In view of the 
well known character of the contracts 
of man3' of these so-called mutual pro- 
tection associations, it is possible that if 
the articles of association and by-laws 
of defendant were set out, it might ap- 
pear that this was the extent of the 
benefits of membership. But these 
articles and by-laws are neither set out 
in the pleadings nor introduced in evi- 
dence. Hence, we are left to construe 
this language of the certificate of mem- 
bership by itself. There is nothing in 
it suggestive of the idea that defend- 
ant's hability is dependent upon col- 
lections received from an assessment. 
Upon its face we think it amounts to an 
absolute undertaking to pay a sum of 
money, the amount of which is to be de- 
termined by the number of contributing 
members. Hence, we think the com- 
plaint states a cause of action, although it 
neither alleges the actual receipt of mo- 
ney upon an assessment to meet the loss 
nor a neglect to make such assessment." 
See also Harl v. Pottawatomie Co. Mut. 
Fire Ins. Co., 74 Iowa 39. 



Against Voluntary Association. — 

Where the by-laws of an unincorpo- 
rated association provide for the pay- 
ment of death losses out of the treasury, 
or, if the fund therein be insufficient, 
by special assessment against the mem- 
bers, the beneficiaries of any member 
who dies have no claims as such against 
the surviving members, but are only 
entitled to enforce the means of pay- 
ment provided hj the by-laws. Ham- 
merstein v. Parsons, 38 Mo. App. 332. 

1. O'Brien v. Home Ben. Soc, 117 
N. Y. 318; s. c, 4 N. Y. Supp. 275; 
Peck V. Equitable Ace Assoc, 5 N. Y. 
Supp. 215; PVeeman v. National Ben. 
Soc, 42 Hun (N. Y.) 252; Cumming v. 
Mayor of Brooklyn, 11 Paige (N. Y.) 
596, 602; Fulmer v. Fitzgerald Equit- 
able Ace Assoc, 5 N. Y. Supp. 837; 
Lueder v. Insurance Co., 12 Fed. Rep. 
465; Earnshaw v. Sun IVJut. Aid Soc, 
68 Md. 465; Jackson xk Northwestern 
Mut. Relief Assoc, 73 Wis. 507; Bur- 
land V. Northwestern Mut. Ben. Assoc, 
47 Mich.' 424; Taylor «. !National Tem- 
perance Relief Union, 94 Mo. 35; Kan- 
sas Protective Union ?'. Whitt, 36 Kan. 
760; s. c, 59 Am. Rep. 607; Kansas L. 
Assoc. 1'. Lemke, 40 Kan. 142; Ex- 
celsior Mut. Aid. Assoc, v. Riddle, 91 
Ind. 84; Hankinson v. Page, 12 Civ. 
Proc Repts. (N. Y.) 279, 2S8; Union 
Mut. Ace Assoc V. Frohard, 25 N. E. 
Rep. 642. 

An omission of the officers of the 
company to make an assessment, which, 
if made, would produce a fund equal to' 
or greater than, the claim, would cre- 
atei»an obligation against the society the 
same as if it had funds on hand from 
which to make the payment. The com- 
pany cannot lie by and omit to put in 
operation the means possessed by it to 
obtain the fund and omit payment be- 
cause of its own neglected duty. This 
would be to take advantage of its own 
wrong, and it Avould operate as a fraud 
on the beneficiary under the certificate. 
Freeman t>. Society, 42 Hun (N. Y.) 1^2. 

In Earnshaw v. Sun Mut. Aid Soc, 
68 Md, 465, the court said: "In fact, we 
have neither found nor been referred to 
any case in which it has been expressly 
decided that no action at law will lie 
against the corporation before an as- 
sessment had been made. In Essender 
V. Mut. Endowment Assessment Assoc, 



Eemedies and Defences MUTUAL INSURANCE. 



on Certificates. 



The recovery should be for the maximum amount insured, 
unless the defendant shows by pleadings and proof that such sum 
should be reduced.^ 

Plaintiff cannot recover for benefits accruing after the com- 
mencement of his action.'* 



59 Md. 463, and Yoe v. B. C. Howard, 
Masonic Mut. Ben. Soc, 63 Md. 86, 
the certificates were of the same char- 
acter as in this case and the actions 
were at law, but no objection was 
made to them on that ground. In 
Eggleston v. Centennial Mut. L. Assoc, 
tS Fed. Rep. 17; 19 Fed. Rep. 201, 
the instrument contained a clause that 
'the onlj action maintainable upon 
this policy shall be to compel the asso- 
ciation to levy the assessments herein 
agreed upon,' and the decisions were 
based exclusively on that clause. And 
in Smith v. Covenant Mut. Ben. Assoc, 
24. Fed. Rep. 685, the opinion as we read 
it, concedes that an action at law would 
lie if it was grounded upon a refusal by 
the company to make the assessment." 
The court has made a mistake as to the 
eifect of Smith's Case, cited sufra. That 
case holds that "to maintain this action 
(at law) it must appear that the associa- 
tion has in its hands the money collected 
by assessment, which it ought to pay to 
the plaintiffs as the beneficiaries entitled 
to the same. If the association has failed 
to make the required assessment, or, 
having made an assessment, has failed 
to collect the same, the plaintiffs' 
remedy is in some other form of action 
or proceeding." 

-1. Lawler v. Murphy (Conn.), 20 Atl. 
Rep. 457; Kaw Life Assoc, v. Lemke, 40 
Kan. 142; Lueder v. Hartford L. & A. 
Ins. Co., 4 McCrary (U. S.) 149; s. c, 
12 Fed. Rep. 465; Elkhart Mut. Aid & 
Relief Assoc, v. Houghton, 103 ind. 
286; s. c, 53 Am. Rep. 514; Excelsior 
Mut. Aid Assoc v. Riddle, 91 Ind. 84. 
Where a by-law provides that on the 
death of a member, when there is not 
enough money in the treasury to pay 
the claim, there shall be an assessment 
on the members, from which, if it is 
sufficient, the claim shall be paid in full, 
and it appears that on the death of a 
member the corporation wrongfully re- 
fused to make such assessment, and 
that, if made at the proper time, the as- 
sessment would have paid the claim in 
full, it is proper, when afterwards de- 
creeing that such an assessment should 
be made, to direct that, if the assess- 
ment prove insufficient to pay the 
claim in full, the association shall make 



up the deficiency. Union Mut. Ace. 
Assoc. V. Frohard (111.), 25 N. E. 
Rep. 642. 

A declaration containing no allega- 
tion of neglect to raiake the assessment 
provided for, and assigning no breach, 
except of a promise to pay the face 
value of the policy, is fatally defective, 
and is not cured by the verdict. Curtis 
V. Mutual Ben. Life Co., 48 Conn. 98. 

In Elkhart Mut. Aid Assoc, v. 
Houghton, 103 Ind. 286, a complaint 
was held sufficient which did not state 
the number of members of the associa- 
tion against whom assessments might 
be made to raise the money with which 
to pay in full or in part the amounts 
named in the certificate. 

Contra. — To recover in an action at 
law, it is necessary to show what is the 
amount realized from one assessment. 
It may be more or less than the face of 
tJie polic3'. In the absence of evidence 
there can be no presumption that it will 
equal the face of such policy, for that 
sum is specified as the greatest sum 
payable, thus clearly implying that it 
may be less. O'Brien t;. Home Ben. 
Soc, 117 N. Y. 318. 

The complaint and proof should 
show the sum which would have been 
realized on an assessment, or that an 
assessment would have yielded returns. 
Martin v. Equitable Ace. Assoc, of 
Binghamton, 9 N. Y. Supp. (Sup. Ct.) 
16; Freeman v. Society, 42 Hun 253. 

In Peck V. Equitable Ace Assoc, of 
Binghamton, 5 N. Y. 215, it was found 
by the trial court that if an assessment 
had been levied as provided by the 
polic}', it would have produced at least 
a sum equal to the face of the policy, 
and the court awarded the plaintiff the 
full amount of the policy with interest 
and cost. 

Demand — Where the contract stipu- 
lates that proofs of death shall be 
furnished to the secretary of the asso- 
ciation, the complaint is sufficient if it 
show that such proofs were furnished 
to the association, and it is not neces- 
sary to aver therein a demand before 
suit brought. Excelsior Mut. Aid 
Assoc. V. Riddle, 91 Ind. 84. 

2. Baltimore etc. Employes' Relief 
Assoc. V. Post, 122 Pa. St. 579. 



90 



Eemedies and Defences MUTUAL INSURANCE. 



on Certificates. 



If an action at law would result in only nominal damages, 
or would for other reasons furnish no remedy, or one that 
is inadequate, a party may sue in equity for a specific perform- 
ance of the contract in the form of a decree, compelling an as- 
sessment to be levied.* 

Where an ordinary civil action affords an adequate and specific 
legal remedy, the beneficiary cannot resort to a proceeding by 
mandamus?' 



1. Covenant Mut. Ben. Assoc, v.. 
Sears, 114 111. 108; Van Houterif. Pine, 
36 N. J. Eq. 133. In the first case the 
court gave as a reason that, as the cor- 
poration is not organized for pecuniary 
profit, has no surplus, and relies entirely 
upon the mortuary assessments made 
upon each death for the payment of ben- 
efits to the beneficiaries of a decedent, 
it vfould be difficult to realize anything 
by execution; and the association stands 
as a trustee of a fund in the hands of its 
numerous members, but belonging to 
the beneficiaries, which can be called 
in by assessment for their use. 

Estoppel. — A mutual company which, 
after the death of the assured, assesses 
his administrator upon the policy, and 
receives payment from him, is estopped, 
in a suit on the policy by the adminis- 
trator, from denying its liability. Harl 
V. Pottawattamie Co. Mut. F. Ins. Co., 
74 Iowa 39. 

Change from Legal to Equitable Ac- 
tion. — Under Code Iowa, §§ 2514, 2689, 
providing that an error of plaintiff in 
the kind of proceedings adopted shall 
not cause an abatement or dismissal, 
but tnerelj' a change into proper pro- 
ceedings, and a transfer to the proper 
docket, and that, in furtherance of jus- 
tice, pleadings may be amended by the 
insertion of material allegations, and 
other statutes relative to amendments, 
a petition at law for damages, on a 
mutual benefit certificate, may, after 
reversal of judgment thereon, be 
changed to one in equity by amend- 
ment praying that defendant be com- 
pelled to levy an assessment on its 
members to paj' the certificate, and 
such amendment does not introduce a 
new cause of action. Newman v. 
Covenant Mut. Ben. Assoc, 76 Iowa 56. 

In Harl V. Pottawattamie Co. Mut. 
Fire Ins. Co., 74 Iowa 39, the plaintiff" 
was allowed, in an action on the policy, 
to amend his petition so as to ask for a 
levy by mandamus. 

2. Excelsior Mut. Aid. Assoc, v. 
Riddle, 91 Ind. 84. See also Manda- 
mus, vol. 14, p. 95. 

91 



"Mandamus does not purport to ad- 
judge or decide any right. It is rather 
in the nature of an award of execution 
than of judgment. It is the mode of 
compelling the performance of ac- 
knowledged duty or enforcing an ex- 
isting right rather than deciding what 
that right or duty is. The award is no 
finality. It concludes nothing. If the 
writ is denied, the relator cannot have 
error, and if granted, the award could 
not be pleaded in law." Burland v. 
Mutual Ben. Assoc, 47 Mich. 427. 

So where a loss had been adjusted by 
the proper officers, and sixty days had 
elapsed after such adjustment before 
the commencement of the action at law, 
and the company' had neglected and re- 
fused to make any assessment to pay 
the loss, mandamus was held to be a 
proper remedy to compel the levj' of 
such an assessment. Harl v. Pottawat- 
tamie Co. Mut. Fire Ins. Co. (Iowa), 
36 N. W. Rep. 880. 

In Miner v. Michigan Mut. Ben. 
Assoc. (Mich.), 31 N. W. Rep. 763, 
mandamus was asked for to compel the 
company to make an assessment upon 
the members of the association suffi- 
cient to pay the judgment, and the 
company in defence set up that they 
had made an assessment and were pro- 
ceeding in good faith to collect it. 
Held, that plaintiff' having judgment, 
and the execution returned unsatisfied, 
no further proceeding could be taken at 
law, and the ^nandam.us must be re- 
fused. Such further proceedings, if 
any are proper, must be had under 
How. St. Mich., § 8153, providing that 
when a judgment shall be obtained 
against a corporation and the execu- 
tion thereon shall be returned unsatis- 
fied, the circuit court may sequestrate 
the property of such corporation. 

Execution. — After a general judg- 
ment on a benefit certificate execution 
cannot be limited to a particular fund. 
Seitzinger v. New Era L. Assoc, m 
Pa. St. 557; McKnight v. Mutual L. 
Assoc, 15 W. N. C. 400. 

The assessments paid into the treas- 



Kemedies and Defences MUTUAL INSURANCE. 



on Certificates. 



It follows that the rights growing out of such contract of in- 
surance may be enforced like external contracts growing out of 
the dealings of the organization with third parties ; and the in- 
sured may recover benefits or his beneficiary a death loss by ac- 
tion at law where a legal remedy is otherwise adequate and ap- 
propriate, notwithstanding the fact of membership. 

Where the liability of the society is contingent upon the per- 
formance of a condition bj' the insured or his beneficiary, substan- 
tial performance, or performance according to the terms of the 
contract or provisions of the constitution and by-laws, must be 
shown, ^ 



ury of a benefit society by its members 
become the property of the society and 
the members have no further claim or 
right to it. Swett v. Citizens' M. Re- 
lief See, 78 Me. 541; York Co. Mut. 
Aid Assoc. V. Myers, 11 W. N. C. 541; 
Brown v. Orr, 112 Pa. St. 233. And a 
member of the association, having no 
interest in the fund, cannot maintain a 
suit to enjoin its payment. Elsey v. 
Odd Fellovfs' M. R. Soc. 142 Mass. 224; 
7 N. E. Rep. 844; 2 N. Eng. Rep. 667. 

1. In Bishop v. Empire Order of 
Mut. Aid, 43 Hun 472, the defence 
set up was the failure of the de- 
ceased member to designate a bene- 
ficiary. The charter provided for a 
beneficiary fund, to be maintained by 
the order for this object, which should 
be under the control of the grand lodge, 
and from which a specified sum should 
be paid over to the families, heirs or 
legal representatives of deceased or 
disabled members, or to such person or 
persons as such deceased member maj', 
while living, have dire6ted, and also 
that the manner and time of payment, 
and the persons to whom payment was 
to be made, should be regulated by the 
rules and by-laws of said grand lodge. 
The issue of a certificate was also pro- 
vided for which it was required should 
set forth the name of the person to 
whom the benefit should be paid. No 
certificate having ever been issued, the 
court held the defendant not liable, and 
considered the making of such designa- 
tion a condition precedent to the de- 
fendant's liability. See also Order Mut. 
Companions v. Griest, 76 Cal. 494. 

Payment of Advance Fee. — Where 
the defence was nonpayment of fee re- 
quired as a condition precedent to 
inembership, it appeared that the cer- 
tificates had been forwarded to the de- 
ceased who was one of its agents; that 
the accounts between him and the com- 



pany were confused; that on one occa- 
sion they had returned to him part of a 
remittance sent by him on the ground 
that it was an overpayment; that they 
had published his name in the list of 
members and had levied a mortuary 
assessment on him as if he were a 
member. It was held that this evidence 
warranted the jury in finding that the 
fee had cither been paid or its pay- 
ment waived as a condition precedent. 
Bankers' & Merchants' Mut. L. Assoc. 
V. Stapp, 77 Tex. 517. 

Proofs of Loss. — A benefit society 
may enforce a by-law requiring an ap- 
peal to be taken befoje suit brought on 
the membership certificate from a sub- 
ordinate to a superior council or lodge, 
but such by-law is void in so far as it 
declares the decision of the appellate 
tribunal final so as to bar a resort to 
the courts. Supreme Council of Or- 
der of Chosen Friends v. Forsinger 
(Ind.), 25 N. E. 129. 

Proofs of Disability. — The by-laws of 
a benefit society may require the ap- 
proval of proofs of a member's disa- 
bility to be satisfactory to the subor- 
dinate council, but such subordinate 
council has no power to finally reject a 
claim. Albert v. Order of Chosen 
Friends, 34 Fed. Rep. 721. 

Knowledge of By- laws. — As the by- 
laws form part of the contract, a repli- 
cation alleging ignorance of the same, 
and the contracting of debts and ex- 
penditures of money through mistake 
constitutes no cause of action, and a 
complaint setting up these facts as a 
basis for recovery is demurrable. Gray 
V. Supreme Lodge Knights of Honor, 
118 Ind. 293. 

Good Standing. — In an action by the 
beneficiary on a certificate of mutual 
benefit insurance, it appeared that de- 
cedent on the day he was notified of 
his suspension for'nonpayment of a de- 



Eemedies and Defences MUTUAL INSURANCE. 



on Certificates. 



unless a waiver of such conditions is proven. ^ 

If a member has paid assessments as demanded, and complied 
with all the requirements of the constitution and by-laws, the 
fact that no certificate has been issued to him, and that he has 
not designated a beneficiary, cannot be set up to defeat his 
action.^ 

A provision in a certificate that " no question as to the val- 
idity of an application or certificate of membership shall be 
raised, unless such question be raised within the first two years 
from and after the date of such certificate of membership, and 
during the life of the member therein named," embraces the de- 
fence of fraud of the insured and beneficiary in obtaining the 
certificate.* 



linquent assessment of which he had had 
no notice, paid the same and all prior 
assessments due, and a subsequent one 
which had not yet become delinquent; 
that therefore when all assessments had 
been paid and accepted by the associa- 
tion decedent gave notice of 'the sub- 
stitution of the. plaintiff for the original 
beneficiary in the regular manner; that 
after decedent's suspension, when one 
meeting having taken place and no ac- 
tion having been taken in reference 
thereto, he was not reinstated into 
full membership until shortly after this 
notice and shortly before his death; it 
was held that there was a sufficient 
finding that decedent was "a member in 
good standing" at the time of his no- 
tice. Millard v. Supreme Council 
American Legion of Honor, 8i Cal. 

340- 

Resort to Internal Remedy. — A bene- 
ficiary is entitled to recover on a valid 
claim, though he did not exhaust the 
remedies known to the society for the 
recovery of claims, as required by its 
laws before bringing suit, where he is 
prevented from doing so by the wilful 
refusal of the proper officer to certify 
to his sickness, froin ^vhich refusal no 
appeal is given by the laws of the so- 
ciety. Supreme Sitting Order of the 
Iron Hall v. Stein, 120 Ind. 270. 

Disability — Meaning of. — Where the 
agreement is to pay benefits to "every 
member who, through sickness or 
other disability, is unable to follow his 
usual business," must pay benefits to a 
member who becomes a lunatic. Mc- 
CuUough V. Expressman's Mut. Ben. 
Assoc. (Pa.), 19 Atl. Rep. 355. 

Where the object of an association 
was to relieve its members while they 
are unable to work by reason of sick- 
ness or injury, total inability to labor. 



provided for bj' the constitution, was 
held not to mean inability to labor at 
the same occupation, but if the mem- 
ber is able to work at other employ- 
ments the benei?ts do not accrue. 
Baltimore & Ohio Employees' Relief 
Assoc. V. Post, 122 Pa. St. 579. 

The constitution of a relief fund asso- 
ciation provided that a member "perma- 
nently disabled from following his or 
her usual or other occupation" was en- 
titled to a benefit; and in another sec- 
tion defined such disability as one 
which should "permanently prevent 
the member from following any occu- 
pation whereby he or she can obtain a 
livelihood." Held, that one who, dis- 
abled from his own profession, had 
been working at another totally dis- 
similar one, was not entitled to a 
benefit. Albert v. Order of Chosen 
Friends, 34 Fed. Rep. 721. 

1. A policy required all insured to 
make put within thirty days a state- 
ment under oath, etc., of the loss. C, 
within the required time, notified the 
company of his loss. The company re- 
plied to this, repudiating all liability on 
the ground of nonpayment of assess- 
ment. Held, that such an act was a 
waiver by the company of any further 
proof of loss by C. Planters' Ins. Co. 
V. Comfort, 50 Miss. 662. 

An insured declared for a loss. The 
company pleaded that he 'had altered 
the buildings, which he traversed by 
his replication. Held, that under the 
pleadings evidence of waiver by the 
company was inadmissible. Diehl v. 
Adams Co. Mut. Ins. Co., 58 Pa. St. 
443; s. c, 98 Am. Dec. 302. 

2. Bishop V. Grand Lodge, 112 N. Y. 
627. 

3. Wright V. Mutual Ben. L. Assoc, 
118 N. Y. 237; \i\a.Tv. Supreme Lodge 



93 



Eemedies and Defences MUTUAL INSURANCE. 



on Certificates. 



Payment to the trustee of the beneficiary designated in the 
policy, and having the same in possession, constitutes a defence,* 
as does a forfeiture or assignment of the contract by the insured 
during his hfetime.^ But when a forfeiture is relied upon it 
must be clearly established according to the contract or by. 
laws.^ 

Whether assessments were made according to the constitution 
and by-laws of a benefit society is a question of law, which, being 
left by the court to the decision of a jury, constitutes error.* 

Where the action is by an assignee, the fact that he has no in- 
surable interest in the life of the insured does not bar his recov- 
ery, where it is shown that the insured himself procured the in- 
surance and paid the premiums.^ 

The defences are as various and numerous as in other actions 
on contract, and the general rules governing liability and discharge 
therefrom must be consulted.® 



of Knights of PythiSs (N. J.), 20 Atl. 
Rep. 36. 

Where the constitution and regula- 
tions provided that, on examination of 
an applicant and approval of the ap- 
plication by the supreme lodge, and the 
signing of the certificate of member- 
ship, and the forwarding of it to the 
subordinate lodge, the contract should 
be complete, it was held that the cer- 
tificate having been forwarded to the 
subordinate lodge, and retained on the 
ground of fraud in the application, the 
beneficiary might recover without pro- 
ducing it, no evidence of the fraud be- 
ing given b}' the corporation. Lorscher 
V. Supreme Lodge Knights of Honor, 
72 Mich. 316. 

1. Butler t'. State Mut. L. Assurance 
Co., 8 N. Y. Supp. 411. 

2. The assignment is not rendered 
void bj the fact that the insured died 
insolvent, when it is not shown that he 
was insolvent at the date of the assign- 
ment. Milner -v. Bowman, 119 Ind. 
448. 

3. Stanley «. Northwestern L. Assoc, 
36 Fed. Rep. 75. 

Where the b_v-laws of a mutual bene- 
fit society require written notice of for- 
feiture of a polic3', proof of any other 
notice is properly excluded in an action 
thereon. Dial v. Valley Mut. L. Assoc, 
29 S. Car. 560. 

Nonpayment of assessment after loss 
does not defeat an action on the policy, 
where the nonpayment is of an assess- 
ment falling due after loss of the prop- 
erty insured. Such provision refers to 
the contract of indemnity. Seyk -v. 
Millers' Nat. Ins. Co., 74 Wis. 67; 



94 



Knights of Honor v. Wickser (Tex.), 
12 S. W. Rep. 175. 

4. Bagle_v v. Grand Lodge Ancient 
Order United Workmen, 131 Ind. 498. 

5. Milner t;. Bowman, 119 Ind. 448. 
Where a certificate provided that the 

benefit should be payable to E. L. V., 
the wife of V., or to such other person 
or persons as he might subsequently 
direct, and a similar power was given 
to V. by the constitution of the endow- 
ment rank, it was held that the relation- 
ship of the payee was not material in 
the contemplation of the insurer, and 
that, as in New Jersey, it is not neces- 
sary that the payee should have an in- 
surable interest in the life of the in- 
sured, the fact that V. knew his state- 
ment as to the relationship of E. L. V. 
to be false did not preclude a. recovery 
on the certificates. Vivar v. Supreme 
Lodge of Knights of Pythias (N.J.), 20 
Atl. Rep. 36. 

6. New Agreement. — Where by the 
terms of the policy a member who had 
forfeited his certificate had a right to be 
restored upon certain conditions, it was 
held that a reinstatement upon compli- 
ance with these conditions, constituted 
no consideration for a stipulation ex- 
acted \>y the society from the benefici- 
ary that it should be liable to pay him 
only a part of the amount to which he 
would be entitled under the terms of 
the policy. Davidson v. Old People's 
Mut. Ben. Soc, 39 Minn. 303. 

Estoppel. — A person is not estopped 
from claiming compensation from the 
railroad for an injury resulting from a 
collision by having been previously 
compensated by the relief association 



Bemedies and Defences MUTUAL INSURANCE. 



on Certifioates. 



for the injury which he then untruth- 
fully alleged was caused by malaria, 
jaundice, constipation, etc., as the rail- 
road and the association are separate 
corporations; and while the former 
guaranties all contracts of the latter, 
yet the association funds are sufficient 
to meet all liabilities likely to arise. 
Owens V. Baltimore etc. R. Co., 35 Fed. 
Rep. 715. 

Double LlabUity.— The by-law of a 
railroad relief association, requiring its 
members to release the railroad com- 
pan3' from any claim for damages before 
appl^'ing to the association for relief, is 
not against public policy, as it simply 
puts a claimant to his election whether 
he will look to the railroad company or 
the relief association for compensation. 
Owens V. Baltimore etc. R. Co., 35 Fed. 
Rep. 715. As to the defence of double 
insurance, see Bock -u. Ancient Order 
of United Workmen, 75 Iowa 462. As 
to payment by levy of assessment un- 
der peculiar by-law provisions, see 
Wadsworth v. Jewelers' etc. Co., 9 N. 
Y. Supp. 711. 

Expulsion of Insane member. — A 
member of a. mutual benefit insurance 
association cannot be expelled from the 
association so as to deprive him of his 
right to mortuary benefits by proceed- 
ings had while he is insane, when no 
notice of the proceedings has been 
served upon him, and the expulsion is 
based mainly upon his admission of 
the matters charged against him, made 
to the tribunal by which he was tried. 
Supreme Lodge Ancient Order United 
"V^orkmen v. Zuhlke (111.), 21 N. E. Rep. 
789. 

Violation of By-law — Drunkenness. — 
Where, in an action on a certificate 
issued by a temperance order, it ap- 
peared that the member died from the 
excessive use of liquor; that he agreed 
in his written application to comply 
with all the requirements of the order 
as a condition precedent^to his being 
entitled to the benefits; that the certifi- 
cate contained a clause in substance 
and effect the same as the application, 
it was held that plaintiff could not re- 
cover. Hogins V. Supreme Council of 
Champions of Red Cross, 76 Cal. 109. 

Release. — A member of a railroad 
relief association, whose constitution 
provided that the railroad's liability 
should be released before the benefit 
should be paid, had designated his 
mother as his beneficiary, and upon his 
death his wife and minor child, the 
persons legally entitled to damages, did 



not release the railroad company, but 
brought suit, and recovered damages by 
a compromise. It was held that the 
mother had no right of action against 
the relief association for the benefits. 
Fuller V. Baltimore etc. Emploj'es Re- 
lief Assoc, 67 Md. 433. See also State 
V. Baltimore etc. R. Co., 36 Fed. Rep. 

65.5- 

No Signature to Application. — An ap- 
plication for a membership in a mutual 
insurance company, made a part of the 
certificate of membership, stated that it 
"must be signed by the applicant, or 
the certificate, if issued, will be void." 
An application was made by a husband 
for the wife, at her direction, and was 
signed by him with the knowledge and 
consent of the agent of the company'. 
The action of the husband was after- 
wards approved by the wife. Held^ 
that the signature to the application 
became in law the signature of the 
wife, and is binding upon the insurance 
company. Somers v. Kansas Protective 
Union, 42 Kan. 619. 

Limitations — Injunction. — Where the 
certificate provides that all suits fo re- 
cover claims under it are to be begun 
within six months after death of the 
assured, and the beneficiary is enjoined 
from receiving payment until the six 
months have expired, suit may be 
brought after the removal of the in- 
junction at any time within the statute 
of limitations. Earnshaw v. Sun Mut. 
Aid Soc, 68 Md. 465. 

Same— Part Payment. — See Kentucky 
Mut. Security Fund Co. v. Turner 
(Ky.), 13 S. W. Rep. 104. 

Under a clause in a policy' limiting 
the right of action to a period of ''six 
months after the happening of the 
death on account of which the action 
is brought," the limitation does not 
begin to run until the cause of action 
matures, following McConnell v. Iowa 
Mut. Aid Assoc. (Iowa), 43 N. W. Rep. 
188; Matt -v. Iowa Mut. Aid Assoc. 
(Iowa), 46 N. W. Rep. 857. 

Ultra Vires. — A religious society, 
formed under the auspices of a church, 
which includes a mutual life insurance 
scheme as one of its features, cannot de- 
fend against a suit on one of its policies 
upon the plea of ultra vires^ when it 
has been receiving the assessments on 
the policy. Matt v. Roman Cath. Mut. 
Protective Soc, 70 Iowa 455. 

But, a charter of a fire insurance 
company authorizing its members to 
take out insurance on their property, 
and to provide for a lien on the same 



95 



Eemedies and Defences MUTUAL INSURANCE. 



on Certificates. 



Against Officers. — Under some circumstances the officers and 
agents of benefit societies, like directors of ordinary business cor- 
porations, incur personal liability to persons who have contracted 
with them in a common name assumed by them, whether they hold 
out such name as that of a corporation or of a purely voluntary 
association.^ 

Fraud is the usual basis of personal liability in such cases, but 
this is not always the case.^ 



to secure assessments, does not author- 
ize a husband to take out such policy 
on separate property of his wife. It is 
void in its inception as ultra vires, and 
cannot be vaHdated by an assignment 
to the wife. Froehly v. North St. Louis 
Mut. F. Ins. Co., 32 Mo. App. 302. 

Withdrawal of Member. — Where the 
by-laws of a life insurance association 
provided that a member may at any- 
time withdraw^ from this association by 
giving notice in writing of such inten- 
tion to do so, and paying all assess- 
ments and dues to date, it was held in 
an action on his certificate after his 
death, that a notice of withdrawal by 
decedent was a bar to the action, though 
the company' had not assented or dis- 
sented thereto, nor erased his name. 
Cramer v. Masonic L. Assoc, g N. Y. 
Supp. 356. 

Misrepresentations in Application. — 
The benefits of Rev. Stat. Mo. 1879, 
§§ .TO?^' 5977' which declare that in 
certain instances misrepresentations 
shall not be a defence, do not apply to 
this class of insurance. Whitmore v. 
Supreme Lodge Knights & Ladies of 
Honor, 100 Mo. 36. 

Where the rules of a mutual aid as- 
sociation forbade the insurance of any 
person over 50 years old, and the agent 
thereof and the insured, both knowing 
of this restriction, conspired together 
to falsely represent that the applicant 
was under 50 years, the company' was 
held not bound by the agent's acts. 
Hanf V. Northwestern Masonic Aid 
Assoc. (Wis.), 4S N. W. Rep. 315. 

1. The authorities are conflicting on 
this point, it having been held in 
numerous early cases that such liability 
does not attach to directors unless they 
are either actual partners or actually 
assumed a personal responsibility. See 
Morawetz Priv. Corp., lj(j 748, 749, and 
cases cited. But several recent well 
considered cases have gone very far to 
establish the doctrine that pretended 
directors and officers of private corpo- 
rations should be held to a joint and 



96 



several liability in all cases where they 
have assumed to act as such for a cor- 
poration which does not in fact exist, 
and contracted in the assumed com- 
mon or corporate name, unless they act 
in good faith and upon an honest belief 
that a corporation has been actually 
formed and that no estoppel exists in 
their favor against persons who have 
dealt and contracted with them in such 
common name. See next note; also 
Officers of Private Corpora- 
tions. 

2. In Lawler v. Murphy (Conn.), 20 
Atl. Rep. 457, it was held that where a 
certificate recited a contract between 
the member and the State Insurance 
Fund A. O. H., and being signed by 
its ofBcers, the liability of the latter was 
sufficiently shown by a complaint which 
alleged that the^- were jointly engaged 
in carrying on a life insurance business, 
and that fliey entered into the contract 
under the said name, the court said: 
"The defendants assign for further 
cause for demurrer, that it appears from 
the contract declared on that the de- 
fendants made no personal agreement 
upon which they were personally' liable, 
but that the contract was signed by 
them only as officers of the organiza- 
tion mentioned therein. This issue is 
raised, not as a question of fact, but as 
a question of law upon the pleadings. 
As a matter of law, does the contract 
upon its face show that the defendants 
made no per^nal contract upon which 
they were personally liable.' The com- 
plaint alleges that they were jointly 
engaged in carrying on a life insurance 
business, under the name of the Con- 
necticut State Insurance Fund, and 
that the3' entered into the contract sued 
upon. If the facts are so, should they 
not be held liable? Does the contract, 
as a matter of law, preclude that state 
of facts? If they had simply been sued 
as individuals, upon a contract headed 
with the name of the association, and 
signed by them, respectively, as presi- 
dent, secretary and treasurer, as ap- 



Eemedies and Defencs MUTUAL INSURANCE. 



on Certificates, 



Directors of incorporated associations are liable personally to a 
member or beneficiary of a matured claim to the extent of all 



pears to have been the case in Hitch- 
cock V. Buchman, 105 U. S. 416, cited 
b3' the defendants, and the complaint 
had contained no allegation that thev 
were carrying on the insurance busi- 
ness under a certain name, and made 
the contract with Thomas Lawler, the 
question would be a diificult one, es- 
peciall3' if it appeared that the associa- 
tion was incorporated. ... It seems 
clear, without pursuing the subject 
matter further, that this cause for de- 
murrer cannot be sustained. Indi- 
vidual members of an unincorporated 
association are liable for contracts 
made in the name of the association, 
without regard to the question whether 
they so intended or so understood the 
law, and e^'en if the other party con- 
tracted in form with the association 
and was ignorant of the names of the 
individual members composing it. And 
the individual members of such an as- 
sociation do not acquire any immunity 
from individual liability b^' force of the 
statutes, which provide that any num- 
ber of persons associated and known by 
some distinguishing name may sue and 
be sued, plead and be impleaded, by 
such name; and that the individual 
property of the members shall not be 
liable to attachment or levy of execu- 
tion in a suit brought against the as- 
sociation." 

In Davison v. Holden, 55 Conn. — , 
under a similar state of facts, the court 
held, "As a matter of law the plaintiff, in 
giving credit to the associate name: gave 
credit to the individuals who, upon en- 
quiry, should be found to stand behind 
it." See also Hitchcock v. Buchanan, 
105 U. S. 416. 

In Grayson x>. Willoughby, 78 Iowa 
83, defendants were the directors of the 
association, and dissolved the corpora- 
tion by consolidating it with another, 
to which it attempted to turn over its 
insurance. The latter corporation re- 
fused to issue a policy to plaintiff in 
lieu of the one held by fier, alleging that 
she had contracted a disease rendering 
her uninsurable. Code Iowa, ijij 1071, 
1072, provides that intentional fraud by 
persons having the management of a 
corporation, such as the diversion of the 
assets from their proper uses, whereby 
insufficient funds remain to meet its lia- 
bilities, will constitute a cause of action 
16 C. of L.— 7 



in favor of any person injured thereby. 
The court held that under said statute 
plaintiff could recover for the damages 
sustained by reason of the consolida- 
tion, which would be measured by the 
amount she had paid into the associa- 
tion. Also that the application for in- 
surance to the company with which the 
defunct corporation was consolidated 
would not amount to a ratification of 
the act of consolidation, so as to bar her 
action for damages. 

In disposing of the first point the 
court said: "It is charged in the pe- 
tition that 'defendants herein, as officers 
and directors of the said association, ab- 
stracted and received therefrom large 
sums of money, the exact amounts of 
which these plaintiffs are unable to state, 
and that the said transfer of the said 
Cosmopolitan Mutual Benefit Associa- 
tion to and consolidation with the said 
Mutual Benefit Association was fraud- 
ulent, and without any authority of law, 
and that \iy reason therefor, and as a 
consideration therefor, these defendants 
received further large sums of money, 
the exact amounts of which the plain- 
tiffs are unable to state, all of which 
was and is in gross fraud and ^'iolation 
of the rights of these plaintiffs.' At the 
first reading of the abstract in this case 
some of us were of the opinion that the 
plaintiff was not entitled to recover 
more than nominal damages. But if it 
be true that the plaintiff has paid ,$100, 
and has lost her insurance by the acts 
of the defendants, and the defendants 
received large sums of money by reason 
of the consolidation, their act was a 
gross fraud, and the plaintiff ought at 
least to recover of them the amount she 
had paid, and which now appears to be 
wholly lost to her." 

On the second point, the objection of 
plaintiff's estoppel, the court was 
equally explicit, saying: "It is set forth 
as ground of demurrer that the plaintiff 
is not entitled to recover damages be- 
cause she ratified the action of the de- 
fendants by applying to the Mutual 
Benefit Association for membership in 
that corporation. Her application was 
no ratification, such as to estop her from 
now asserting any claim she may have 
against the defendants for fraud. We 
think the demurrer should have been 
overruled." 



97 



Matters of Practice. MUTUAL INSURANCE. Parties. 

misappropriations and misapplications of assets whereby the as- 
sociation is rendered insolvent. ^ 

A receiver appointed after insolvency may maintain such 
action.^ 

The action lies in favor of the beneficiaries of an unincorpo- 
rated association for any deficiency they may be unable to collect 
by enforcement of the by-laws, where the funds have been misap- 
propriated by the directors.^ See also OFFICERS OF Private 
Corporations. 

X. Matters or Peactice — 1. Parties. — The statutory provisions 
governing parties to civil actions will, to a great extent, be found 
applicable to actions on certificates, whereon members of benefit 
societies are entitled to benefits and their beneficiaries to death 
losses. The latter have, after the death of a member on whose 
life the insurance was held, a vested interest within the meaning 
of statutes requiring actions to be brought in the name of the 
real party in interest, as has often been recognized in actions on 
regular policies, and the principle is applied to benefit certificates,* 
although the beneficiary be not privy to the contract.^ 

The administrator and the heirs cannot join in an action on a 
policy of insurance for a loss occurring after the death of the 
assured.® 

But where the policy is payable to the assured, " his executors, 
administrators or assigns " for the benefit of wife and children, the 
personal representative is held to be the proper party plain- 
tiff.' 

1. Stewart w. Lee Mut. F. Ins. Assoc, 111. 324; Connecticut L. Ins. v. Luchs, 
64 Miss. 499. In this case the funds in 108 U. S. 498; Catland v. Hoj't, 78 Me' 
the hands of the company arising from 355; Stowe v. Phinnej, 78 Me. 244; s. c, 
dues and advance assessments had been 57 Am. Rep. 796. 

appropriated by the directors to the The bringing of an action in the name 

payment of its privilege, taxes and at- of the administrator of a deceased mem- 

torney's fees, stripping it of its assets ber of a mutual benefit association on a 

and rendering it insolvent. certificate of membership payable to 

2. Appeal of McCarty, no Pa. St. the member's heirs, is a harmless error, 
379. where the administrator is also the sole 

3. Hammerstein v. Parsons, 29 Mo. heir of such deceased member. Peet v. 
App. 509. Great Camp Knights of Maccabees of 

4. York County Mut. Aid Assoc, v. the World (Mich.), 47 N. W. Rep. 119. 
Myers, II W. N. C. (Pa.) 541. Statutory Provisions. — The provi- 

B. Beardslee v. Morgner, 4 Mo. App. sions of Stat. Mass., 1877, ch. 204 (Pub. 

139; Barbaro v. Occidental Grove No. Stat., ch. 115, § 8), that beneficiary cor- 

16; 4 Mo. App. 429. porations may establish by assessment 

6. Pfister V. Gerwig, 122 Ind. 567. a fund "to be held by such association 
An administrator of the insured may until the death of a member occurs, 

maintain an action on such certificate and then to be forthwith paid to the 

though his petition needlessly aver that person or persons entitled thereto," and 

the action is for the benefit of the cred- the similar language of Stat. 1882, ch. 

itor. Rindge v. New England Mut. 195, § 2, which increased the number of 

Aid Soc, 146 Mass. 286. those for whose benefit such corpora- 

7. Fairchild v. Northeastern Mut. tions could insure, do not give a right 
L. Assoc, 51 Vt. 613; Grattan v. of action on the certificate to the per- 
National L. Ins. Co., 15 Hun 74; Massa- sons for whose benefit the contract is 
chusetts Mut. L. Ins. Co. v. Robinson, 98 expressed to be made. Upon the death 



Matters of Practice. MUTUAL INSURANCE. 



Pleading. 



If, however, a certificate provide for the payment of different 
sums to different parties, they cannot join in one suit, but must 
bring separate actions, each for his individual share.^ ' 

Whether, if the amount of the insurance be payable to certain 
persons equally, they may join in one action, seems not to be 
settled.^ Upon principle it would seem that they might and thus 
avoid a multiplicity of suits. 

2. Pleading. — The complaint on a benefit certificate must allege 
due performance of whatever conditions are, in the contract or by- 
laws, or both, made conditions precedent to the society's liability. 
Proofs of death of the insured are generally required to be fur- 
nished to the officers within a specified time. In the absence of 
a good and sufficient cause excusing it, compHance with this re- 
quirement must be alleged and shown.* 

The requisites of a declaration on an ordinary insurance policy 
are entirely applicable to certificates of membership.'* 



of a member intestate, such action is 
properly brought by the administrator. 
Flynn v. Massachusetts Ben. Assoc. 
(Mass.), 25 N. E. Rep. 716. 

1. Emmeluth v. Home Ben. Assoc. 
(N. Y.), 25 N. E. Rep. 234; Frazer -v. 
Phoenix M. L. Ins. Co., 36 Up. Can., Q^ 
B. 422; Keary v. Mutual Reserve Fund 
L. Assoc, 30 Fed. Rep. 359; Campbell 
V. National L. Assoc. Co., 34 Up. Can., 
Q. B. 35. 

2. Covenant Ben. Mut. Assoc, v. 
Hoffman, no 111. 603. 

3. Fire Ins. Co. v. Felrath, 77 Ala. 
194; s. u., 54 Am. Rep. 58, holding also 
that such stipulations are binding on 
the parties. It is an essential of such by- 
laws as of all others that they be rea- 
sonable and not retroactive. In Uni- 
versal F. Ins. Co. V. Block, 109 Pa. St. 
535, it was held that a condition in a fire 
policy requiring a certiiicate or affidavit 
from the nearest magistrate, or a fire 
marshal, stating certain facts, is unrea- 
sonable and therefore void. See also 
Shannon v. Hastings Mut. F. Ins. Co., 
26 U. C. C. P. 3S0, and where it is 
provided or the member has contracted 
that proofs of death should be "satis- 
factory to the directors," they cannot 
capriciously demand unreasonable 
proof. Braunstein v. Accidental Death 
Ins. Co., I B. & S. 782; S Jur., N. S. 
506; 31 L. J., Q, B. 17; 5 L. J., N. S. 

4. The essential parts of the declara- 
tion are stated in Brooklyn L. Ins. Co. 
V. Bledsoe, 52 Ala. 538. The court said : 
"The contract or policy of insurance 
must be declared on, in licec verba, or 
according to its legal eifect; the plain- 



tiff's interest in the subject of insur- 
ance; the payment of the premium; the 
inception of the risk; the performance 
of any precedent condition or warranty 
contained in the policy, and the loss, 
or happening of the event, on which, 
within the terms and meaning of the 
policy, the liability of the insurer at- 
taches, must be alleged. The general 
rule applicable to all executory con- 
tracts is, that if the defendant's per- 
formance depended upon a condition 
precedent, the plaintiff must aver the 
fulfilment of such condition, whether it 
is affirmative or negative, or to be per- 
formed or observed by him, or the de- 
fendant, or a mere stranger to the con- 
tract, or must show an excuse for non- 
performance. If nonperformance is 
excused, the matter of excuse must be 
distinctly averred." 

A declaration, which names no sum 
for which defendant became liable under 
the terms of the certificate, and which 
does not make the certificate a part 
thereof, is fatally defective, and the 
omission is not cured by the verdict. 
Abe Lincoln Mut. L. & Ace. Soc. v. 
Miller, 23 111. App. 341. 

Assumption of Liability by New Cor- 
poration. — A petition on a certificate 
against a mutual benefit association, al- 
leging that defendant was the legal suc- 
cessor of another such association which 
had issued the certificate, having re- 
ceived all its assets and effects and as- 
sumed to pay all its liabilities, and to 
fulfil all its obligations and engage- 
ments, including the demand sued on, 
sufficiently states that the first associa- 
tion no longer exists, and that defend- 



Matters of Practice. MUTUAL INSURANCE. Pleading. 

Where the liability of the society is limited to the proceeds of 
an assessment upon the members, the complaint should aver that 
the assessment has been made and collected, or that the company 
had refused to make the assessment } and a petition which does 
not aver that defendant failed, or refused to lay any such assess- 
ment, or that, having laid one and collected it, failed and refused 
to pay the same to plaintiff, is demurrable. ** 

A complaint, in an action on such a certificate, need not aver 
the number of members of the rank to which the deceased be- 
longed at the time of his death, that fact being peculiarly within the 
knowledge of the defendant.^ 

To maintain an action at law upon such certificate for the max- 
imum sum therein, it must be alleged and shown that the company 
has levied an assessment upon certificate holders to pay the death 
■ claim, has collected the amount of such assessment, and has failed 
to pay to the beneficiary the sum so collected.* 

The rules of pleading at common law have been modified, and 
to some extent abrogated, by the statutory provisions in the va- 
rious States. These need not be discussed in this connection. The 
general averment that plaintiff has " fulfilled all the conditions " 
is not a sufficient averment that proofs of loss, have been made 
in the way specifically required in the by-laws or contract.^ 

Where plaintiff claims under the by-laws of a benefit society, it 
is not sufficient to allege generally that there was a rule or by- 
law under which he was or became entitled, etc.® The rule or its 

ant is its legal successor. Stanley v. 4. Smith v. Covenant Mut. Ben. As- 
Northwestern L. Assoc, 36 Fed. Rep. soc, 24 Fed. Rep. 6S5. 
75. , Where the declaration alleged in two 
When Assignment Must be Alleged. — of the special counts that the member- 
Underact Pa., April 15, 1868, § i (P. ship was sufEcient to make the amount 
L. 103), providing that all policies of named in the certificate by the payment 
life insurance taken out for the benefit of two dollars each, it "was held on 
of the insured's wife shall be vested in demurrer, that these allegations re- 
such wife clear from the claims of the duced to certainty that whicli would 
insured's creditors, a declaration in an without them have been uncertain, 
action on a benefit certificate by an ad- Gossett v. Union Mut. Ace. Assoc, 27 
ministrato]-, which shows that the cer- III. App. 266. 

tificate was taken out in the name of 6. Dolbier v. Agricultural Ins. Co., 

plaintiff's decedent, and was made pay- 67 Me. 180; Crescent Ins. Co. v. Camp, 

able to his wife, and shows no transfer 64 Tex. 521; Quarrier v. Peabody Ins. 

of title from the wife to decedent, is Co., 10 W. Va. 507; Royal Ins. Co. v. 

demurrable, though it also avers that Smith, 8 Ky. Law R. 521; Faver- 

the certificate is part of decedent's es- weather v. Phoenix Ins. Co., 7 N. Y. 

tate, and that such estate is insolvent. St. Rep. 25; Edgerly v. Farmers' Ins. 

McNeil V. Supreme Coramandery, 131 Co., 43 Iowa 587. But see Scheiderer 

Pa. St. 339. -'. Travelers' Ins. Co., 58 Wis. 13; Sun 

1. Fitzgerald v. Equitable Reserve Mut. Ins. Co. v. Holland, 2 Wills. 
Fund L. Assoc, 5 N. Y. Supp. 837; (Tex.) 391; Schobacker v. German- 
Taylor V. National Temperance Relief town Farmers' Mut. Ins. Co., [;9Wis.B6. 
Union, 94 Mo. 35. 6. Irish Catholic Ben. Assoc, v. 

2. Taylor v. National Temperance O'Sliaughnessey, 76 Ind. 191. 

Relief Union, 94 Mo. 35. So in an action for sick benefits to 

3. Supreme Lodge Knights of Pythias recover a balance alleged to be due at 
V. Knight, 117 Ind. 489. the rate of $3 per week, the mere state- 

100 



Matters of Practice. MUTUAL INSURANCE. 



Pleading. 



substance, as well as compliance with its provisions, must be 
stated. 1 

Where the original beneficiary brings an action upon a changed 
certificate, and any proper regulation of the society has been vi- 
olated by such change, he must aver and prove the same.^ 

In California it has been held that plaintiff must set out in his 
complaint and prove performance of conditions contained in the 
application for membership, and the truth of statements and dec- 
larations therein contained.^ But the weight of authority is op- 
posed to this view.* 

With regard to answers in actions upon certificates of member- 
ship, it need only be said that they must conform to the general 
rules of good pleading as in other actions." 



ment that such an amount is "the sum 
paid to the sick of said society," is not 
sufficiently specific, and states no cause 
of action. Beneficial Society t'. White, 
30 N.J. L. 313. 

1. Ta3'Ior v. National Temperance 
Relief Union, 94 Mo. 35. 

This rule is changed by statute in 
Indiana where, in pleading the perform- 
ance of condition precedent in a con- 
tract, it is sufficient to allege generally 
that the party performed the condition 
on his part. National Ben. Assoc, v. 
Bowman, no Ind.355. 

2. Masonic Mut. Ben. Soc. i'. Burk- 
hart, no Ind. 189. 

3. Bidwell v. Connecticut L. Ins. Co., 
3 Sawyer (U. S.) 261; Gilmore v. Ly- 
coming F. Ins. Co., 55 Cal. 123. See 
also Bobbitt v. Liverpool L. tV G. Ins. 
Co., 66 X. Car. 70; s. c, 8 Am. Rep. 494. 

4. See Redman v. Aetna Ins. Co., 49 
Wis. 431; Continental L. Ins. Co. v. 
Kessler, 84 Ind. 31 j; Commonwealth 
Ins. Co. ZK Monninger, 18 Ind. 352; 
Mutual Ben. L. Ins. Co. v. Cannon, 48 
Ind. 264; Forbes v. American Mut. L. 
Ins. Co., 15 Gray (Mass.) 249; s. c, 77 
Am. Dec. 360; Hei^ron v. Peoria M. & 
F. Ins. Co., 28 111. 235; s. c, 81 Am. 
Dec. 272; Lounsbury 7;. Protection Ins. 
Co.. 8 Conn. 459; s. c, 21 Am. Dec. 
186; Union Ins. Co. v. McGookey, 
33 Ohio St. 555; Penn. Mut. L. Ins. 
Co. V. Wiler, 100 Ind. 92; Guardian 
Mut. L. Ins. Co. V. Hogan, 80 111. 35; 
s. c, 2j Am. Rep. 180. 

In Ma^' V. Buckeye Ins. Co., 25 Wis. 
291; s. c, 3 Am. Rep. 76, after stating 
what the application must contain, and 
that any false description by the assured, 
or omission to make known any fact 
material to the risk, shall render it void, 
the policy added, "but the company will 
1)6 responsible for the accuracy of sur- 



veys made by its agents," it was held 
that the word "survey'" must here be 
construed to include the whole applica- 
tion, when made out by the agent, and 
the company is thus expressly precluded 
from taking advantage of his inaccuracy 
or omission in drawing the same, where 
the facts have been fully stated to him 
by the assured. It was said b^' the 
court that it would be intolerable in an 
action on an insurance policy to require 
the plaintiif to prove affirmatively in 
the first instance the truth of every 
statement usually contained in an appli- 
cation for insurance. 

5. Due Performance. — The charter of 
a mutual benefit insurance company 
provides that the board of directors may 
appoint a committee to make assess- 
ments, and that a member in default for 
30 days forfeits his membership. It was 
held that before an assessment is due, 
or forfeiture can occur, it must affirma- 
tively appear that the assessment was 
legally made, viz, by the board, or by 
the committee appointed by the board; 
and an allegation by the company that 
the assessment was "duly made," is not 
sufficient. American Mut. Aid Soc. v. 
Helburn, 84 Ky. i. 

Waiver — Admission. — Where the de- 
fendant set up that the member insured 
had failed to pay his assessments during 
a certain year and plaintiff, by reply, 
denied such failure, and alleged that de- 
fendant had subsequently demanded, 
received, and retained annual payments, 
and had thereby' waived the alleged 
prior breaches, it was held that the 
pleading of a waiver did not admit the 
failure to pay assessments, and was not 
inconsistent with the denial of such 
failure. Tobin v. Western Mut. Aid 
Soc, 72 Iowa 261. See also Gray v. 
National Ben. Assoc, in Ind. 531. 



101 



Matters of Practice. MUTUAL INSURANCE. 



Evidence. 



3. Evidence. — The law of evidence as applied to actions on in- 
surance policies, and certificates of benefit societies, presents noth- 
ing peculiar. The rules excluding parol evidence to contradict a 
writing has seemed to receive important modification when ap- 
plied to this form of contract. But if, under the supposed pres- 
sure of the equities of the case, or prevailing prejudice, new ex- 
ceptions to the general rule have apparently been discovered or 
invented, " it has been to give effect to great principles of justice 
without too strict a regard to mere technicalities."^ 



Suicide of Member. — Where the plea 
was that a stipulation in the application 
excepting death by suicide from the risk 
■was proposed by the member to induce 
defendant to issue the certificate, well 
Icnowing that he would not be received 
as a member unless he so stipulated; 
that the certificate would not have been 
issued if he had no stipulation, and that 
he committed suicide, it was held not 
obnoxious to a general demurrer. 
Northwestern Ben. & Mut. Aid Assoc. 
V. Hand, 29 111. App, 73. 

Cliainpertous Contract. — The defend- 
ant cannot set up as a defence a cham- 
pertous contract for the collection of 
assessments made by the treasurer of 
the company with a person not a part\' 
to the suit. Connecticut River Mut. ¥. 
Ins. Co. V. Way, 62 N. H. 622. 

Conclusion as to Effect of By-law. — 
Where the defence is that the certificate 
was issued in violation of the rules and 
by-laws of the association, a copy of 
such rules and by-laws should be set 
out in the answer. It is not sufficient 
for the pleader to give his own conclu- 
sions as to their effect. Gray v. Na- 
tional Ben. Assoc, 118 Ind. 293. 

Want of "Legal Notice." — An answer 
is not sufficient which sets out that de- 
ceased failed to pay his dues after "legal 
notice." The giving of notice being a 
condition precedent to a member's lia- 
bility, the facts showing that the notice 
provided by the charter had been given 
shoud have been set out. Coyle v. 
Kentucky Grangers' Mut. Ben. Soc. 
(Ky.), 2 S. W. Rep. 676. 

Nonpayment of Assessments. — An 
answer stating that decedent failed to 
pay assessments within the time limited, 
after being duly notified, is not demur- 
rable on the ground that it does not 
allege that the assessments were not in 
fact paid, as no person other than de- 
cedent was liable to pay the assess- 
ments. Gray v. Supreme Lodge 
Knights of Honor, iii Ind. 531. 

1. Bacon Ben. Soc. & Life Ins., § 456. 



Admissible evidence of defendant's 
medical examiner that plaintiff had 
never been examined as required by 
the rules. Baltimore etc. Employees' 
Relief Assoc, v. Post, 122 Pa. St. 428. 

Of decedent's withdrawal, though not 
pleaded. Cramer v. Masonic L. Assoc, 
9 N. Y. 8. 356. 

Under a notice by defendant, under 
the plea of the general issue, that it 
will insist on its defence that the cer- 
tificate was procured by false statements, 
to the medical examiner, and the con- 
cealment of material facts concerning 
the health of the insured, is sufficient to 
let in evidence of a particular disease 
with which the insured was suffering. 
Breisenmeister v. Supreme Lodge 
Knights of Pythias (Mich.), 45 N. W. 
Rep. 977. 

Inadmissible evidence of the num- 
ber of policy holders in the State who 
paid the mortality assessment in ques- 
tion, and to whom notices and extra 
assessments had been sent, the evidence 
not bearing upon the question whether 
the policies sued on were forfeited. 
Dial V. Valley Mut. L. Assoc, 29 S. 
Car. 560. 

In an action against a mutual insur- 
ance company to recover benefits ac- 
cruing from plaintiff's inability to work, 
receipts of plaintiff for the benefits as 
a former member of the association. 
Baltimore etc. Employees' Relief Assoc 
V. Post (Pa.), 5 Atl. Rep. 885. 

Holding also that the statements of 
an agent of a railroad company who 
has nothing to do with making out the 
pay-rolls, having no authority to de- 
duct dues owed by an employee to the 
Employees' Relief Assoc, and his 
declarations that a deduction had been 
made without a previous showing that 
it had been officially notified that the 
employee was a member of the asso- 
ciation were not admissible, plaintiff's, 
inability to labor being the cause of ac- 
tion. 

A statement made by the member 



102 



Matters of Practice. MUTUAL INSURANCE. 



Evidence. 



If the failure to pay assessments is relied upon, the burden of 
proving such failure is upon the defendant,^ but where the allega- 
tion that the member was in good standing at the time of his 
death is denied by the answer, the burden of proving such 
good standing is on the plaintiff.* 

Where the action is by the assignee of a member, the burden 
of proving that the assignment was made in accordance with the 
by-laws of the society is on the plaintiff.* 

Where the policy is payable to a number of individuals, be- 
tween whom the right of survivorship with relation to the con- 
tract exists, the burden of proving that any one of them survived 
the others, is upon the party asserting it.* 

If the by-laws of the society require proofs of death to be fur- 
nished, and a presentation of such proofs is alleged, of course no 
.further proof of that fact can be required; but, in the absence of 
any such provision, the fact of the death of the insured may be 
established as in other cases, and according to the general rules of 
evidence on the subject — such as the issuance of letters of admin- 
istration, etc,^ or by circumstantial evidence, when direct evidence 
is not attainable, to the extent at least of raising a presumption of 
the party's death.® 

The insured in a mutual insurance company, being a member, 



that he was suspended for the nonpay- 
ment of an assessment is not competent 
evidence to prove that fact. Lazensky 
V. Supreme Lodge Knights of Honor, 
31 Fed. Rep. 592. 

In an action against a mutual benefit 
association letters written by officers of 
the association commenting on the 
merits of plaintiff's claim and dis- 
cussing its validity. Bagley v. Grand 
Lodge Ancient Order United Work- 
men, 131 Ind. 498. 

Where the issue was whether or not 
a forfeiture had occurred, evidence that 
the general manager of the association 
had told the assured that some of his 
assessments were overdue; that he had 
thereby lost his right to the certificate, 
and that he was delaying payment at 
his own risk and peril. Odd Fellows' 
Mut. Aid Assoc, v. Sweetser (Ind.), 19 
N. E. Rep. 722. 

1. Tobin V. Western Mut. Aid Soc, 
73 Iowa 261. 

2. Siebert v. Chosen Friends, 23 Mo. 
App. 268. Compare Tobin v. Western 
Mut. Aid Soc, 72 Iowa 261. 

3. Henry v. Trustees of Grand 
Lodge I. O. M. A., 15 Bradw. (111.) 

151- 

4. Fuller V. Linzee, 135 Mass. 468. 

5. Millard v. Supreme Council 
American Legion of Honor, 8i Cal. 



340; Lancaster v. Washington L. Ins. 
Co., 62 Mo. 121; Tisdale v. Connecti- 
cut Mut. L. Ins. Co., 26 Iowa 170; s. c, 
96 Am. Dec. 136; Newman v. Jenkins, 
10 Pick. (Mass.) 515; Cunningham v. 
Smith, 70 Pa. St. 450; Jeffers v. Rad- 
cliiF, 10 N. H. 242; INIunro v. Merchant, 
26 Barb. (N. Y.) 383; McKimm v. 
Riddle, 2 Dall. 100. 

In an action for a benefit claimed on 
the death of a member, evidence that 
defendant's officers declined to receive 
proofs of death on the ground that the 
deceased member had been suspended, 
is not proof of actual suspension such 
as to require a nonsuit. Stewart v. 
Supreme Council American Legion of 
Honor, 36 Mo. App. 319. 

6. Travellers' Ins. Co. v. Sheppard 
(Ga.), 12 S. E. Rep. 18; Boyd v. New 
England Mut. L. Ins. Co., 34 La. An. 
848. 

As to absence of party raising pre- 
sumption of death, see Lancaster v. 
Washington L. Ins. Co., 62 Mo. 121; 
John Hancock Mut. L. Ins. Co. v. 
Moore, 34 Mich. 41 ; Sensenderfer v. Pa- 
cific Mut. L. Ins. Co., 19 Fed. Rep. 68; 
Whiteley t). Equitable L. Assurance Soc, 
72 Wis. 170; Hancock v. American L. 
Ins. Co., 62 Mo. 26; Prudential Assur- 
ance Co. V. Edmonds, L. R., 2 App. 
Cas. 487. 



103 



Matters of Practice. MUTUAL INSURANCE. 



Evidence. 



the books of the company are as much his as other members, and 
are evidence against him.^ 

Where a policy provides that the company will pay the bene- 
ficiary a percentage of the assessments collected, the beneficiary 
can recover without proving demand on the company to make as- ' 
sessments, or that assessments have been made, or the amount 
collected thereon.* 

In an action by a receiver upon a premium note given to an in- 
surance company, such evidence of general losses and of settle- 
ment and allowance of the same as would have concluded the 
company in its proper business, will sufifice.* 



1. Diehl V. Adams Co.. Mut. Ins. 
Co., 58 Pa. St. 44.3; s. c, 98 Am. Dec. 
302. 

The question whether the books of a 
mutual fire insurance company furnish 
sufficient data for a correct assessment 
is a question for the jurj'. Marblehead 
Mut. F. Ins. Co. V. Underwood, 3 Gray 
(Mass.) 210. 

When Only Prima Facie Evidence. — 
The entrj' of an order upon the min- 
utes of a mutual association, suspend- 
ing a member for nonpayment of an 
assessment, being only prima facie 
evidence of its legality, parol evidence 
is admissible to show that it was by 
order of an officer alone. Knights of 
Honor v. Wickser (Tex.), 12 S. W. 
Rep. 75; Lazensky v. Supreme Lodge 
Knights of Honor, 31 Fed. Rep. 592. 
Holding also that an application for re- 
instatement, made by the member, is 
not competent evidence to prove the 
fact of his suspension. 

The record of a director's vote au- 
thorizing assessment is frima facie 
evidence of losses and assessments. 
Connecticut Mut. F. Ins. Co. v. Way, 
62 N. H. 622. 

Mailing Notice. — A finding that notice 
was not mailed to the insured will not 
be disturbed, siich mailing being proved 
only by the general course of business 
of defendant. Garretson v. Equitable 
Mut. L. Endowment Assoc, 74 Iowa 
419. As to proof of long continued 
usage of societj' to waive personal no- 
tice, and the admissibility of evidence 
on that point, see Stewart v. Supreme 
Council American Legion of Honor, 
36 Mo. App. 319. 

Presumption of Proofs Furnished. — 
Vhere it is the duty of the subordinate 
lodge to report the death of the mem- 
ber to the supreme lodge, it will be pre- 
sumed that the requisite proofs of the 
death were furnished; especially where 



defendant refuses to pay on the ground 
of the fraud in the application. Lorcfier 
V. Supreme Lodge Knights of Honor; 
72 Mich. 366. 

Of Good Standing. — Where it was a 
condition of the certificate that the 
member should be in good standing at 
the time of his death, it was held that 
proof of a recognition of such member- 
ship by the defendant up to within a 
short time of the death of the member, 
in connection with the presumption 
that all persons follow such laws, rules 
and regulations as they are under, was 
sufficient evidence of the good standing 
of the member to maintain the action. 
Lazensky v. Supreme Lodge Knights 
of Honor, 31 Fed. Rep. 592. 

Of Extent of Liability. — In an action 
on a certificate, in which plaintiff is en- 
titled to the amount of one death as- 
sessment, not exceeding a given sum, 
he can recover nominal damages only, 
in the absence of the evidence of the 
amount realized by one assessment. 
Ball V. Granite State Mut. Aid Assoc, 
64 N. H. 2gi; Newman v. Covenant 
Mut. Ben Assoc, 72 Iowa 242. 

Priest as Witness — Neglect of Easter 
Duties. — Where the constitution of the 
society provided that if the insured 
neglected his Easter duties he forfeited 
at once all his rights and interests in 
the society, testimony of the priest of 
the defendant's parish of a negative 
character to establish defendant's neg- 
lect of such duties is not sufficient. 
Matt V. Roman Catholic Mut. Protect- 
ive Soc, 70 Iowa 455. 

2. Kansas Protective Union v. Gard- 
ner, 41 Kan. 397. 

3. Jackson v. Roberts, 31 N. y. 304; 
Pacific Mut. Ins. Co. v. Guse, 49 Md. 
329; s. (,., 8 Am. Rep. 132; Mutual Ben. 
L. Ins. Co. V. Jarvis, 22 Conn. 133; 
Long Pond Mut. F. Ins. Co. v. Hough- 
ton, 6 Gray (Mass.) 77; Cora. v. Dor- 



104 



Contribution, etc., 



MUTUAL INSURANCE. Upon winding Up. 



XI. CONTBIBUTIO» AND DISTRIBUTION UPON WINDING UP — 1. By 
Insolvency Proceedings. — The peculiarity distinguishing the insol- 
vency of a benefit society from that of ordinary corporations and 
copartnerships, consists in the fact that usually the .only credit- 
ors, as well as the only distributees, are the members of which it 
is composed. A receiver appointed by the court to wind up its 
affairs should proceed in other respects to collect the assets and 
make distribution as in receiverships of other insurance com- 
panies.* 

Upon winding up an insolvent mutual insurance company, 
claims founded upon policies which matured before the appoint- 
ment of the receiver, are to be preferred to claims which were at 
that time unmatured. The status of the policy holder or his rep- 
resentative toward the company is changed by the maturity of 
the policy, and he then stands to the company in the same rela- 
tion that a creditor holds to a firm — he is to be preferred to its 
members.^ But a policy holder, whose loss occurred after an ap- 
pointment of a receiver for the insolvent company, is not entitled 
to a share in the distribution of the assets.* 

Death losses should be allowed in full, with a credit to the 
amount of any premium notes in the hands of the company.* 



Chester Mut. F. Ins. Co., 112 Mass. 142; 
Atlantic Mut. F. Ins. Co. v. Fitzpat- 
rick, 2 Gray (Mass.) 279; Appleton 
Mut. F. Ins. Co. V. Jesser, 5 Allen 
(Mass ) 446; Nashua F^ Ins. Co. v. 
Moore, 55 N. H. 48;' Atlantic Mut. F. 
Ins. Co. V. Young, 38 N. H. 451; s. u., 
71; Am. Dec. 200; Thomas v. Whallen, 
31 Barb. (N. Y.) 172; Matter of Bangs, 
15 Barb. (N. Y.) 264; Savage v. Med- 
bury, 19 N. Y. 32; Bangs v. Duckin- 
field, 18 N. Y. 592; Herkimer Co. Mut. 
Ins. Co. V. Fuller, 14 Barb. (N. Y.) 
373; Devendorf v. Beardsley, 23 Barb. 
(N. Y.) 656; American Ins. Co. v. 
Schmidt, 19 Iowa 502; Ohio Mut. Ins. 
Co. V. Marietta Woolen Factor^', 3 
Ohio St. 348. 

1. Attorney General v. Guardian 
Mut. L. Ins. Co., 77 N. Y. 272, 

Where the assessment made by a 
receiver vpas greatly in excess of the 
amount required to pay losses, it was 
held that in an action on a premium 
note by the assignee to recover the as- 
sessment due thereon, the burden is on 
him to show that such assessment was 
reasonably proper in view of all the 
circumstances, Lehigh Vallej' F. Ins. 
Co. V. Dryfoos (Pa.l, 9 Atl. Rep. 262. 

Notice. — If publication be required to 
be for a certain number of weeks, and 
the effects of the company go into the 
hands of a receiver after an assessment 



105 



is levied and before the notice by publi- 
cation is completed, it is held that 
actual notice by the receiver is suffi- 
cient. Cooper V. Shaver, 41 Barb. 
(N.-Y.) 151. 

2. Vanatta v. New Jersey Mut. L. 
Ins. Co., 31 N.J. Eq. i c;. 

3. Doane v. Milvill'e Mut. M. & F. 
Ins. Co., 43 N. J. Eq. 522, holding also 
that where the officers of a mutual 
company, with knowledge of its insol- 
vency, but before it had been so de- 
clared, voluntarily cancelled the policy 
of one of its members, and executed a 
release from all liability thereunder, the 
policy holder was, nevertheless, still 
liable for all losses and expenses in- 
curred during the life of the policy, and 
which actually existed at the time of 
cancellation. 

4. People V. Security L. Ins. etc. 
Co., 78 N. Y. 114; s. c, 34 Am. Rep. 
522. 

Where no holders of death claims 
had applied to have an assessment or- 
dered by the court, and as it was found 
expressly that an attempt to raise the 
money to pay them by an assessment 
would be futile, it was held that no as- 
sessment should be ordered. Burdon 
V. Massachusetts Safety Fund Assoc, 
147 Mass. 368. 

As such societies are either prohib- 
ited from accumulating funds or prop- 



Contribution, etc., 



MUTUAL INSURANCE. 



Upon Winding Up. 



When such an institution becomes insolvent, the collapse is 
generally complete, as the obligation to pay assessments gener- 
ally rests upon the will of the members without any personal 
promise to pay.^ 

The liability assumed in the contract of membership is not op- 
tional, but absolute and fixed ; it is not released either by disso- 
lution or insolvency.^ 

When a mutual fire insurance company has become insolvent, 
the previously accrued profits which have been credited to the pol- 
icies do not belong to the policy holders, but are funds for the 
payment of losses.^ 

2. By Dissolution or Abandonment. — As regards the duties, rights, 
and liabilities of members, the effect of dissolution or abandon- 
ment differs but little from insolvency. In either case no fur- 
ther business can be transacted by the company as such, nor any 
additional risks taken. When a corporation, in the nature of a 
benefit society, ceases to do business because of some impedi- 
ment — as, for example, being refused a licence by the State in which 
it was incorporated — it cannot organize a new company against 
the will of the old members, but, on application of such old mem- 
bers or parties insured, a court of equity will wind up the affairs 
of the old company and compel the distribution of such fund 
among those for whose benefit it was created.* 



erty, and have no occasion to do so, it 
is rarely the case that any distribution 
is to be made to the members, except 
to those holding matured claims for 
benefits, who, as has been stated, are 
witd respect to these not to be treated 
as members but as creditors. For 
liability of members to assessment to 
pay accrued losses upon insolvency, see 
Extent and Nature of Liability, 
III, 5, herein; Assessments, VII, i 
and 2 herein. 

1. Bacon Ben. Soc. & Life Ins., ij 479. 

2. North Carolina etc. Ins. Co. v. 
Powell, 71 N. Car. 389. Or expiration 
of charter. Huntlej' v. Beecher, 30 Barb. 
(N. Y.) 580; Huntley -v. Merrill, 32 
Barb. (N. Y.) 626. 

Where a portion of the business of an 
insurance company is transacted upon 
the stock plan, and a portion upon the 
mutual system, and the premiums re- 
ceived from persons obtaining insurance 
upon the former plan, by paying the 
whole premium in cash, have been ex- 
pended in the payment of losses and ex- 
penses, and thus relieving former mem- 
bers from assessments upon their notes, 
and leaving others to be assessed for the 
payment of subsequent losses, there is 
no remedy for any injustice wliich may 
result from this mode of transacting the 



business of the company; although the 
effect is to cast the greater burden upon 
those whose notes, happen to be in force 
at the time the insolvency of the com- 
pany occurs. Shaughnessy v. The Rens- 
selaer Ins. Co., 21 Barb. (N. Y.) 605. 
Neither the insolvency of a mutual 
fire insurance company nor the can- , 
cellation of a policy, deprives the com- 
pany of the right to assess upon the pol- 
icy' holder losses that accrued while he 
was a member of the company. Com- 
monwealth V. Massachusetts Mut. F. 
Ins. Co., 112 Mass. 116. It was also held 
in this case that when the losses by fire 
suffered by a mutual fire insurance com- 
pany render it insolvent, and require an 
assessment to the full amount author- 
ized by law, the holder of an unex- 
pired policy, the cancellation of which 
has been rendered necessary by such in- 
solvency, has no right of set-off or of 
recoupment, or claim for return of 
premium, or for damages on account of 
the unexpired term of his policy; but 
that the holder of such policy has a right, 
in case of the subsequent insolvency of 
the company and the distribution of its 
assets by receivers, to share in the assets. 

3. Com. v. Massachusetts Mut. F. 
Ins. Co., 1X2 Mass. 116. 

4. Bacon Ben. Soc. Il \Aie. Ins., § 479. 
106 



Contribution, etc., MUTUAL INSURANCE. Upon Winding Up. 

A voluntary association may be dissolved similarly, and with 
like effect as a copartnership, either by direct consent of the mem- 
bers, or such intent may be presumed from abandonment, as 
from a neglect to hold meetings for a protracted period.-' 

Where the objects of the organization are impracticable, illegal, 
or fraudulent,* or in case of violent dissensions and irreconcilable 
differences between the members, it will be dissolved by a court 
of equity and its funds distributed as on the winding up of a co- 
partnership,^ and under the general rules of equity jurisprudence 
applicable to copartnerships.* 

When the society is incorporated its dissolution and the pro- 
ceedings in the disposition of its property are governed by the 
rules applicable in the case of corporations generally.^ 

Where, upon dissolution, a pro rata distribution is proper in 
payment of losses, no notice should be taken of priority in their 
occurrence.® The ordinary rules governing the distribution of 



In Staram v. Northwestern Mut. Ben. 
Assoc, 63 Mich. 317, the court said: 
"Mj' opinion is that no assessments could 
legall}' be made by the board of trustees 
for the purpose of paying losses which 
occurred after licence to do business was 
refused. The inhibition of the statute 
extended to the exercise of corporate 
functions in Michigan. Its proceedings 
as a corporation were arrested, and, as 
no steps were taken by it to obtain the 
right to do business any longer, but, on 
the contrary, it abandoned the field, 
the proceedings to close up its affairs 
should date from that time." Such 
revocation of licence has the effect of a 
dissolution except for the purpose of 
administering the assets either through 
the directors under statutory authority 
or by a waiver. The members are en- 
titled to their distributive share of any 
money on hand at the time, and if losses 
occurred prior to that time, the bene- 
ficiaries are entitled to precedence and 
payment of their policies in full from 
the fund. If members have died since, 
their representatives are entitled to the 
distributive shares of such members. 
See Cramer v. Bird, L. R., 6 Eq. 143; 
Slee V. Bloom, ig Johns. (N. Y.) 456; 
s. c, 10 Am. Dec. 273; Bradt v. Bene- 
dict, 17 N. Y. 93; Marr v. Bank of 
West Tennessee, 4 Coldw. (Tenn.) 471; 
In re Suburban Hotel Co., L. R., 2 Ch. 

App. 737- 

1. Strickland v. Prichard, 37 Vt. 324; 
Penfield v. Skinner, 11 Vt. 296. 

2. Peltz V. Supreme Chamber of the 
Order of Financial Union (N. J.), 19 Atl. 
Rep. 668; Pearce v. Piper, 17 Ves. i; 
Ellison V. Bignold, 2 Jac. & Walk. 511; 



Reeve v. Parkins, 2 Jac. & Walk. 390. 
Beaument v. Meredith, 3 Ves. & Bea. 
181; Lowry v. Stotzer, 7 Phila. (Pa.) 
397; Toram v. Howard Ben. Asso., 4 Pa. 
St. 519. 

3. Lafond v. Deems, 52 How. Pr. (N. 
Y.) 41; 81 N. Y. 507. See Fischer v. 
Raah,57How. Pr."(N.Y)94; Wells w. 
Gates, 18 Barb. (N. Y.) 557; Wait In- 
solvent Corp. 391. 

4. Gorman "U. Russell, 14 Cal. 531. 
B. See Morawetz on Priv. Corp, §§ 

1002, 1004. 

At common law the funds of a cor- 
poration remaining after payment of its 
liabilities vested upon dissolution in 
the State. Titcomb v. Kennebunk Mut. 
F. Ins. Co., 79 Me. 315. 

The rule applies to incorporated mu- 
tual insurance companies in the absence 
of statutory provisions, preserving the 
rights of members and incorporators. 
Titcomb v. Kennebunk Mut. F. Ins. Co., 
79 Me. 315. 

However, there is a strong inclination 
on the part of courts to look beyond the 
entity and preserve the rights of those 
composing the corporation, and it is 
probable that such a result would be pre- 
vented by a court of equity in most of the 
States evenwithout a statutory' provision 
on the subject. See Carlton v. South- 
ern Mut. Ins. Co., 72 Ga. 37 1 ;. Mor. Priv. 
Corp., § 1032; Corporations, 4 Am. & 
Eng. Encyc. of Law 306. 

6. Richards v. New Hampshire Ins. 
Co., 43 N. H. 263. 

The winding up and distribution of 
the assets of a mutual insurance com- 
pany by mutual agreement of all the 
members, does not relieve them from 



107 



Definitiou. MUTUALITY OF CONTRACT— MY. Definition. 

assets upon dissolution may be altered by contract or provisions 
previously made in the constitution and by-laws.^ 

MUTUALITY OF CONTRACT— (See also CONTRACTS).— Mutual- 
ity of contract means an obligation on each to do, or permit to be 
done, something in consideration of the act or promise of the 
other. It does not imply that every stipulation is absolute and 
unqualified.^ 

MUTUAL MISTAKE— (See also Mistake).— According to the 
real signification of the word "mutual" in such connection, and the 
ordinary acceptation and understanding of the term, " mutual 
mistake" would mean a mistake reciprocal and common to both 
parties, where each alike labored under the same misconception 
in respect to the terms of the written instrument.^ 

MUTUANT— MUTUARY.— These terms denote the lender and 
borrower respectively in a " Mutuum."* 

MUTUUM — (See also Bailments, 2 Am. & Eng. Encyc. of 
Law 40). — Mutuum is a loan of an article for consumption which is 
to be returned in kind, such as corn, oil, wine or money." 

MY. — If a testator refers to his possessing any particular and 
definite thing such as, "my estate," " my ring," or "my horse," 
it seems that the contrary intention referred to by the Wills act® 
is manifested, and the will as to such bequests speaks from its 
date and the gift is specific, but when the bequest is generic of 



paying the premium notes in an action 
Ijrought bj the receiver. Lawrence v. 
Nelson, 4 Bosw. (N. Y.) 240. 

The legal representatives of certificate 
holders who died without having in- 
curred any forfeiture, and who had not 
had any benefit from an assessment, are 
to share equally with other holders of 
certificates in force. 

But certificates which, at the time the 
bill for dissolution was filed, had not 
been in force for a year, within which 
time they were to make their first pay- 
ment to the fund, are not to share in tfie 
fund unless it should appear that the 
payment had been made since that date 
within the year. Burdon v. Massachu- 
setts SafetyFund Assoc, 147 Mass. 360. 

1. It ma3' be provided that certificate 
holders who have suffered losses shall 
not be preferred, but share equally with 
other members. Burdon v. Massachu- 
setts Safety-Fund Assoc, 147 Mass. 360. 

Rev. St. Mo. 1879, ^ 6046 provides 
that, in proceedings to dissolve insolvent 
fire insurance companies, the commis- 
sioner "shall ascertain the amount of 
premium unearned on each policy out- 
standing and in force at the time of the 



decree dissolving the company, and the 
amount of losses outstanding at that 
time" to which are to be applied the as- 
sets of the company. It was held that 
the holder of a policy issued after the 
enactment of the statute was only enti- 
tled, where the loss occurred after the de- 
cree of dissolution, to the amount of the 
unearned premium, though he had no 
notice of the dissolution proceedings. 
Relfe V. Commercial Ins. Co., 10 Mo. 
App. 393; Carr v. Union Mut. F. Ins. 
Co., 28 Mo. App. 215. 

Cross Bill by Holder of Death Claim. — 
Upon the filing of a bill in equity to 
wind up a mutual benefit association and 
distribute its assets, the holder of a death 
claim against the association has an 
interest in the subject matter of the pro- 
ceeding and may properly file a cross- 
bill to prevent the misappropriation of 
a trust fund. Wilber v. Torgerson, 24 111. 
App. iig. 

2. Spear v. Orendorf, 26 Md. 37, 43. 

3. Botsford v. McLean, 45 Barb. (N. 
Y.) 478. See Mistake. 

4. And. L, Diet. 694. 

5. Story on Bailm., § 228. 

6. I Vict. 26. 



108 



Definition. 



MY. 



Definition. 



that which may be increased or diminished such as " consuls," 
the act requires something more to indicate such contrary inten- 
tion than that the subject matter should be preceeded by "my," 
and accordingly, as to such a bequest the will would speak from 
the death of the testator.^ But it has been stated that the use 
of the pronoun " my " in the description of the thing given is 
not sufficient evidence of an intention that the will shall not 
speak from the date of the death. ^ 



1. Goodlad v. Burnett, i K. & J. 341; 
Re Gibson, L. R., 2 Eq. 66g; s. c, 35 L. 
J. Ch. 596. See also Jarnn. on Wills 
329-332. And as to the old rule, see 
Jarm. on Wills 320-329. 

2. Dart. 309. This statement is, made 
on the authority of Miles v. Miles, \^. 
R., I Eq. 462. 

My Arrival. — In an instrument of bot- 
tomry the term "my arrival" was used 
in the following connection: '"I bind 
myself, my ship and tackle, etc., to pay 
the sum borrowed with twelve per 
cent, bottomry premium in eight days 
alter my arrival at the port of London. 
Held, that the words "my arrival" must 
be understood to mean my arrival-vjitk 
the ship, or my ship's arrival. Tiie 
court, in discussing the question whether 
or not the borrower was personally 
bound by this clause or whether the 
lender took upon himself the peril of 
the voyage, says: "Now, if the words in- 
stead of eiffkt days after my arrival 
had been eight days after m.y ship's ar- 
rival, there could have been no doubt 
that the lender took upon himself the 
perils of the vo^-age, if there be not, in 
some part of the instrument, some mat- 
ter denoting a contrar}' intention. Now, 
the personal arrival of the master un- 
connected with the ship is a matter 
which it cannot be supposed either 
party contemplated; it cannot be sup- 
posed that the lenders looked to him 
personally or to his personal means, nor 
that he intended to pledge himself per- 
sonally and abselutely for the pay- 
ment without regard to the means he 
might be furnished by the ship and her 
freight. Simonds v. Hodgson, 3 B. & 
Ad. 50. 

My Books. — A testator directed in his 
will "that any advancements made by 
me to or for the account of ray said 
children or either of them, and evi- 
denced either \>y entries in my books of 
account or by any written memo- 
randum of acknowledgment signed 
bv such child or children, shall be de- 
ducted from the amount or charged 



upon the share," etc. The testator was 
the leading member of a firm and kept 
no private book account of his own, 
and there appeared from these books 
that the firm had advanced money to 
some of his children, and that these ac- 
counts were balanced and carried into 
the testator's private account. Held, 
that the term wv books was to be 
regarded as meaning the books of the 
firm, as used in this clause of the will. 
Lawrence v. Lindsay, 68 N. Y. 108. 

My Brother's Son. — A testator used 
the following expressions in his will: 
"I give, devise and bequeath unto 
Mathew WestlaUe, my brother, and to 
Simon Westlake, my brother's son, all 
that my fee simple," etc., in certain 
premises. It appeared in evidence that 
the testator had three brothers, Thom- 
as, Richard and Mathew, and each of 
whom had a son of the name of 
"Simon." The defendant's counsel 
contended that theie facts established 
a latent ambiguity in the will, and they 
tendered evidence of declarations of 
the testator to show that he had in- 
tended to bequeath his property to 
the defendant, Simon Westlake, who 
was the son of Richard Westlake. 
Held, that the fact of the three brothers 
of the testator having each a son of the 
name of "Simon" did not raise any am- 
biguity upon this will, and that in point 
of legal construction, where thetestaor 
is speaking of his brother's so?/, he 
must be taken to speak of the son of 
his brother who was then particularlv, 
in his mind. Mathew Westlake was 
then in the testator's mind, and conse- 
quentl3- Simon Westlake, his son, must 
be the person intended. Westlake f. 
Westlake, 4 Barn. & Aid. 57. 

My Chambers for Which I Paid Six 
Hundred Guineas. — A testator, in a codi- 
cil to his will, after making a special be- 
quest in money to Hon. Thomas Sta- 
.pleton, used the following expression: 
"And also bequeath to him my cham- 
bers in Albany, for which I paid six 
hundred guineas, with all my furniture," 



109 



Definition. 



MY. 



Definition. 



etc. The testator died seized in fee of 
the chambers in Albany, and of no 
other. Stapleton, under whom the de- 
fendant claimed, and who was a stran- 
ger in blood to the testator, entered 
into the possessin-i of the chambers, 
and died about eleven years afterwards. 
The lessor of the plaintiff was the only 
surviving trustee under the will. Held, 
that the words which the testator used 
in this codicil are not sufficient to 
take the fee simple from the heirs at 
law. Sewell v. Parrett, 3 B. & Adol. 
469. 

My Desire. — A testatrix, in her will, 
gave all of her property to her daugh- 
ter. It also contained the following 
clause: "My desire is that she allows 
to A G an annuity of £25 during her 
life." Held, that no trust or obligation 
to pay an annuity was imposed upon 
the daughter, but that there was only a 
request to the daughter, not binding her 
in law, to make that provision for A G. 
/« re Diggles; Gregory v. Edmonds, 39 
Ch. D. 253. 

My Estate. — The words "my estate," 
as used in the Cal. Civ. Code, ^ 1402, 
have been held to relate to what the tes- 
tator owned and could dispose of. 
Momford's Estate, Myrick's Probate, p. 
133. 

My House. — In an application for in- 
surance upon a house, it was described 
as "my house in which I reside," and 
in the policy as, "his two story frame 
dwelling house." The assured was in 
possession under a contract, and had 
partly paid for it, but had not received 
his deed. Held, that there was no mis- 
description in this case of the subject 
of insurance in the policy. Neither 
was there any misrepresentation or 
concealment of any fact on the part of 
the assured which was at all material to 
the risk, in the application for the in- 
surance; and that it is a fact of public 
notoriety that, in common parlance, the 
person who is in possession of real 
property as owner, under a valid and 
subsisting contract for the purchase 
thereof, whether he has paid the whole 
of the purchase-money and gotten the 
legal title or not, is called the owner 
thereof, and the property is usually 
called ills by others; and in equity it is 
in fact his, and the vendor has only a 
lien thereon for the security of his un- 
paid purchase monev. Aetna Fire Ins. 
Co. V. Tyler, 16 Wend. (N.Y.) 385;. 
s. c, 30 Am. Dec. 90. 

My Land. — The words "mj' land" 
were used in a will, with an additional 



110 



description erroneously naming it as 
the south half of the north-east (in- 
stead of noTih.-'wesi) quarter of the sec- 
tion. The testator never owned the 
northeast quarter, ^ but did own the 
northwest quarter. Held, that it was 
the intention of the testator to devise 
the southwest quarter of the section. 
Cleveland v. Spilraan, 25 Ind. 94. 

My Plantation. — A testator's will con- 
tained, among other things, the follow- 
ing devise: "My plantation on Stann's 
Island I devise to my cousin, William 
Smith." Held, that this passed the fee. 
Peyton v. Smyth, 4 McCord (S. Car.) 
476; s. c, 17 Am. Dec. 758. 

My Property. — A testator's will con- 
tained the following devise: "My prop- 
erty, after my debts are paid, I leave 
and bequeath to my beloved wife," etc. 
Held, that this passed the whole of the 
testator's property, both real and per- 
sonal, in fee to his wife. In deciding 
this case, Spencer, Ch. J., says: "The 
question turns upon the term 'my 
property,' whatever that was he de- 
vised to his wife. The devisor gave 
her all his property. There is nothing 
to limit the devise to any species of 
propertj' or to any portion of it; all the 
testator's property must pass or none." 
Jackson v. Housel, 17 Johns. (N. Y.) 
281. 

A bequest of "all my property" will 
pass property subject to a general 
power of appointment. Chandler v. 
Pocock, 16 Ch. D. 648. 

"My house," where there are two 
answering the description given. See 
Gardiner -Z'. Jewers, W. N. (72) 35. 

A devise of "my Bland Air estate, 
with all the slaves and their increase, 
which I derived from my uncle, T F, 
and all the personal property thereon, 
not slaves, and used with the same at 
the time of my death, unto my 
daughter," is a specific devise; and so 
is a devise of "all my books, historical 
and geographical, of Greece, of Rome, 
etc., to my son in law," etc. Mayo v. 
Bland, 4 Md. Ch. 484. 

A will contained a bequest of "half 
my property at Rothschilds Bank." At 
the tirhe of the making of the will, and 
at the time of his death the testator 
had at R.'s bank in Paris a cash bal- 
ance and certificates of French shares, 
some inscribed and some of them trans- 
ferable bj' delivery, which were de- 
posited with the bankers, who received 
the dividends and carried them to the 
testator's credit. Held, by Chitty, 
J., that half of the property meant 



definition. 



MY SON— MYSTIC WILL. 



Sefinition. 



MY SON. — When the object of a gift in a will is designated by 
the term " my son " of a particular name, it means the son of that 
name at the date of the will and him only.^ And the same rule 
seems to apply when the legatee or devisee in a will is described 
as " my son ;" it would relate to the son (if any) living at 
date of the will, and would exclude any after born son, although 
such after born son should, by reason of the death of the former 
son, happen to be the only person answering that description at 
the death of the testator.'* 

MY WIFE.— See note 3. 

MYSTERY. — In statutes that require the addition to be given 
to the defendant, who is indicted, of his estate or degree, or 
" mystery," " mystery " in this connection means the defend- 
ant's trade, art or occupation, such as merchant, mercer, tailor, 
painter, clerk, schoolmaster, laborer, or the like. If a man has 
two trades, the degree of " mystery " must be stated as that to 
which the defendant was entitled at the time of the indictment.* 

MYSTIC "WILL. — In Louisiana, a mystic will is a will under 
seal.^ 



only half of the cash balance due the 
testator. But it was held on appeal 
that it meant half of both the cash 
balance and the shares. In re 
Prater Designe v. Beare, 37 Ch. D. 
481. 

Myself. — Where a promissory note 
was made payable "to the order of my- 
self," and there being two names as 
payors to the note, held that parol evi- 
dence was admissible to show who were 
the parties meant by "mj'self." Jenkins 
■V. Bass, II S. W. Rep. 293. 

1. I Jarm. on Wills 323. Where an 
estate is given to a person described by 
relation either to the testator or to 
other devisees, on a contingency that 
mav or may not happen, and a person 
is in being at the time of the execution 
of the will, to whom, on the happening 
of the contingency, the description 
would apply, it is a safe general rule to 
hold such person as intended to be the 
devisee. Aushutz v. Miller, 81 Pa. St. 
212. 

2. I Jarm. on Wills 323. Although 
this author la^'s this down to be the 
rule, yet he admits in a note that it is 
done with some diffidence because of 
the strong tendency of the courts to 
extend as much as possible gifts to 
children, and calls attention to the case 
of Perkins v. Micklithwait, i P. W. 
275, where, as he states, "a legacy, 
originally designed for a son of the 



testator who died after the execution of 
the will, was held to belong by effect of 
the codicil to a subsequently born son 
of the same name, but the express 
terms of the codicil appear to have 
warranted the construction, since it 
gave to the latter over and above what 
the testator had given him b^' his will." 
I Jarm. on Wills 200. 

When a testator, in his will, made 
three bequests to his three sons, and in 
each bequest described them as fol- 
lows: "My beloved son David Stew- 
art," etc., "my beloved son Alexander 
Stewart," etc., "my beloved son Joseph 
Stewart," etc., these bequests were held 
to be good, although two of the sons 
mentioned were illegitimate. Stewart 
V. Stewart, 31 N. J. Eq. 398. 

3. A testator, during his lifetime, 
separated from his wife, and a marriage 
ceremony took place between him and 
another woman, with whom he lived 
for many years as his wife. In his will 
he made this second wife his residuary 
legatee as "my wife." The first wife, 
being still alive, it was held that the 
second wife was the person intended in 
the will, and grant of probate was 
made to her as residuary legatee. 
Howes Goods, H. Ct. Prob. Div. 48; 
J- P- 743; s. I.., Cent. L. J. 479. 

4. State V. Bishop, 15 Me. 122. 

5. Hart V. Thompson, 15 La. 88; 
Stafford v. Villian, 10 La. 319-328. 



Ill 



Definition. 



NAKED— NAME. 



Definition. 



NAKED. — Nude ; uncovered. ^ 

NAKED DEPOSIT.— See also BAILMENT, 2 Am. & Eng. Encyc. of 
Law 40; Deposit, 5 Am. & Eng. Encyc. of Law 570. 

NAKED POWER— (See also POWERS). — A power simply collat- 
eral and without interest or naked power is, when, to a mere 
stranger, authority is given of disposing of an interest in which he 
had not before, nor hath by the instrument any estate whatso- 
ever.* It is a right or authority disconnected from any interest 
of the donee in the subject matter.^ 

NAME — (See also ABATEMENT; ABBREVIATION; CORPORA- 
TIONS ; Criminal Procedure ; Foreign Corporations ; In- 
dictment; Judicial Notice; Judgments; Trade Marks; 
Partnership). 



I. Definition, 112. 
II. Name Has Two Members, 

"3- 

III. Christian Name, 113. 

IV. Middle Name Unimportant, 

114. 
V. Abbreviations,! 15. 
VI. Corruptions, Derivations and 

Prefixes, 116. ' 

VII. Presumption that Letter Con- 
stitutes Name, 116. 
VIII. Names of Bastards, 117, 
IX. Names of Divorced Women 

117. 
X. Name of Month, 117. 
XI. Change of Name, 117. 

1. Power of Courts, 117. 

2. Effect of Change, 1 18. 
XII. Right to Adopt Any Name, 

118. 

XIII. Right to Name Child, iiO. 

XIV. Right of Property in Names, 

118. 
XV. Marriage Under Fictitious 
Name, 119. 
XVI. Land Office Proceedings, 119. 
XVII. Identity, 119. 
XVIII. Sex, 121. 

XIX. Junior or Senior, 121. 
XX. Doctrine of Idem Sonans, 122. 
I. Statement of the Rule 122. 



2. How Question Determinedy 

126. 

3. Names Beginning with 

Different Letter, 127. 
XXI. Words of Identification, 127. 
XXII. Names on Ballots, 127. 
XXIII. Names in Legal Proceedings 
— Misnomer, 128. 
I. In General, 128. [i30- 

;i. Initials of Third Persons, 

3. Partnership Names, 130. 

4. Change of Name Pending 

Action, 130. 

5. Name Unknown, 131. 

6. Alias Dictus, 131. 

7. Names in Judgments, 132. 

8. Statute of Additions, 133. 

9. Effect of Sustaining Plea; 

Amendment, 134. 
XXIV. Names of Corporations, 135. 

1. In General, 135. 

2. Express Averment Not 

Necessary IVhere Name 
Implies a Corporation, 

I39-. 

3. Variance 

Name i 
141. 

4. Variance 

Name in Grants. 
XXV. Miscellaneous, 142 



in Corporate 
J u d g m e n t s 



Corporate 
141. 



I. Definition. — One or more words used to distinguish a par- 
ticular individual ; as, Socrates, Benjamin Franklin.* 



1. Publishing photographs of girls 
bare to the waist will not support an in- 
dictment for publishing obscene pictures 
of "naked" girls. Com. v. Deiardin, 
126 Mass. 47 

Naked Authority. — See Authority; 
Agency 

Naked Confessions. — A free and vol- 
untary confession. See also Confes- 



sions, 3 Am. & Eng. Encyc. of Law 

449- 

Naked Contract. — See Contract, 
3 Am. & Eng, Encyc. of Law 825. 

2. Bergen v. Bennett, i Cai. Cas. (N. 
V.) 15. 

3. Clark v. Hornthal, 47 Miss. 434— 

534- 

4. Bouvier's Law Diet., tit. Name. 

112 



Kame has Two Members. 



NAME. 



Christian Name. 



II. Name Has Two Membees. — At common law, the name of an 
individual consists, presumptively, of one Christian, baptismal, 
or given name, and also one surname, family name, or patro- 
nymic.^ But it has been held that the legal presumption that every 
person possesses both a Christian name and a surname, does not 
prevail in respect to the names of negroes in those States where, 
as slaves, they very frequently had no surname whatever.^ It is 
held also in an early Kentucky case that whether a person has 
both a surname and a Christian name is entirely a question of fact ; 
and that if a plaintiff sues by only one name, the court will not 
presume that he has any other.^ 

III. Christian Name. — The name usually conferred upon a 
person in infancy by his parents, referred to in the old books as 
" the name of baptism," and used to distinguish him from others 
having the same patronymic, which it precedes, is his " Christian 
name."* 

There is no presumption of law that any name is used ex- 
clusively as a Christian name and not as a surname, or vice versa.^ 

Where a person has selected one of his Christian names other 
than the first, as the one by which he is to be known, he cannot 



As applied to persons, it is a "dis- 
criminative appellation or designation 
of an individual." People v. Ferguson, 
8 Cow. (N. Y.) 102. 

For an interesting account of the 
origin and growth of names as applied 
to persons and families, see Encyc. 
Brit., tit. Names. 

1. Vawter v. Gilliland, 55 Ind. 278; 
Frank v. Levie, 5 Robt. (N. Y.) 599. 

Legal Name. — "By the common law, 
since the time of William the Norman, 
a full name consists of one Christian or 
given name and one surname or pat- 
ronymic, the two, using the Christian 
name first and the surname last, con- 
stitute the legal name of the person." 
BiDDLE, J., in Schofield v. Jennings, 68 
Ind. 233. 

In 4 Bacon's Abr. 752, it is declared 
to be "repugnant to the rules of the 
Christian religion that there should be 
a Christian without a " name of bap- 
tism." 

2. In Boyd v. State, 7 Coldw. (Tenn.) 
69, the court held that it would not take 
judicial notice that colored persons ne- 
cessarily have a surname, and that an in- 
dictment charging the murder of "one 

William , a man of color,'' was 

sufficient in the absence of evidence 
that the deceased had any other name. 

3. Brashears v. Stothard, Lit. Sel. 
Cas. (Ky.) 209. 

4. See also tit. Christian Names, 
3 Am. & Eng. Encyc. of Law 239. 



16 C. of L.— 8 



113 



Lord Coke is authoritj' for the state- 
ment that "a man may have divers 
names at divers times, but not divers 
Christian names." Also that "regularly 
it is requisite that the person be named 
by the name of baptism, for that a man 
cannot have two names of baptism as 
he may have divers surnames." Coke 
Lit. 3a. 

"If a man be baptized by one name 
and confirmed by another name, as if 
he be baptized by the name of Thomas 
and confirmed by the name of Francis, 
he shall be named in actions Francis, 
according to the confirmation, and not 
according to the Christian name." 15 
Viner's'Abr., tit. Nosmes, p. 595. 

The name which a man "always went 
by," which he declared to be his name 
in a dying declaration, and by which 
his mother knew him, may be deemed 
his right name, notwithstanding he may 
have had a different name of baptism. 
Binfield v. State, 15 Neb. 484. 

5. State V. Bayonne, 23 La. An. 78, 
in which case the court refused to nold 
that the name Arabrosio, as given in an 
indictment ("one Ambrosio") to desig- 
nate the person alleged to have been 
murdered, referred to his Christian 
name. 

The court cannot determine, without 
proof, whether the name Santa Anna is 
a Christian name, a surname, or both. 
Gabe v. State, 6 Ark. 519. 

Defendant was sued by the name of 



Middle Name XTnimportant. 



NAME. 



Middle Name Unimportaat. 



object to being sued or indicted by such name instead of by his 
first name.' 

When a certificate of stock was filled out with the wrong 
Christian name of stockholder, parol evidence was admitted to 
show the mistake.** 

IV. Middle Name TJnimpoktant. — The common law recognizes 
but one Christian name ; hence the middle name or names, or the 
middle initial letter or letters, of a person's name are not material, 
either in civil or criminal proceedings, and a variance between the 
pleading and proof in respect to such names or initials is, accord- 
ing to nearly all the authorities, harmless.* 

Such names or initials may properly be omitted altogether.* 

The middle name not being recognized in law, it is error to sue 
or indict a person by such name alone, unless it be made to ap- 
pear that he commonly uses and is known by that name.* 



"Jonathan, otherwise John Soans.'' It 
was held no ground of demurrer, for 
non constat that it was not all one Chris- 
tian name. Scott v. Evans, 3 East 3. 

1. United States r". Winter, 13 Blatchf. 
(U. S.) 276. 

2. Cleveland v. Burnham, 64 Wis. 
347; 10 Am. & Eng. Corp. Cas. 221. 
See also Parol Evidence. 

3. Bratton v. Sej'mour, 4 Watts (Pa.) 
329; Paul V. Johnson, 9 Phila. (Pa.) 32; 
Dilts V. Kinney, 15 N.J. L. 130; Stew- 
art w. Colter, 31 Minn. 385; Tucker v. 
People, 122 111. 583; Miller v. People, 
39 111. 457; Langdon v. People (111. 
1S90), 24 N. E. Rep. 874; State v. Bow- 
man, 78 Iowa 519; State v. Smith, 12 
Ark. 622; o. c, 56 Am. Dec. 287; Rooks 
V. State, 83 Ala. 79; Pace v. State, 69 
Ala. 231; s. c, 44 Am. Rep. 513; Ed- 
mundson v. State, 17 Ala. 179; s. c, 52 
Am. Dec. 169; Choen v. State, 52 Ind. 
347; s. c, 21 Am. Rep. 179; People v. 
Ferris, 56 Cal. 442; State v. Black, 12 
Mo. App. 531; Hughes v. Sellers, 34 
Ind. 337; Van Voorhis v. Budd, 39 
Barb. (N. Y.) 479; Milk v. Christie, i 
Hill (N. Y.) 102. 

4. Rooks V. State, 83 Ala. 79; Ross v. 
State, 116 Ind. 495; People v. Lake, no 
N. Y. 61; Roosevelt v. Gardinier, 2 
Cow. (N. Y.) 463; Franklin v. Tal- 
madge, 5 Johns. (N. Y.) 84; State v. 
Martin, 10 Mo. 391; Hart ii. Lindse3', 
17 N. H. 235; King V. Hutchins, 28 N. 
H. 561; s. c, 43 Am. Dec. 597; Keene 
T'. Meade, 3 Pet. (U. S.) 7; Games v. 
Stiles, 14 Pet. (U. S.) 322; Harris v. 
Muskingum Mig. Co., 4 Blackf (Ind.) 
267; s. c, 29 Am. Dec. 372; Alexander 
XK Wilmorth, 2 Aik. (Vt.) 413; Isaacs 
V. Wiley, 12 Vt. 674; Walbridge v. 
Kibbee, 20 Vt. 543; Allen v. Taylor, 26 



Vt. 599; McKay v.^ Speak, 8 Tex. 376; 
Sullivan v. State, 6 Tex. App. 319; 
Dodd V. State, 2 Tex. App. 58; Dixon 
V. State, 2 Tex. App. 531; Thompson 
11. Lee, 21 111. 242; Erskine v. Davis, 25 
111.251; Bletch t;. Johnson, 40 111. 116; 
Hendershott v. Thompson, i Morris 
(Iowa) 186; Schofield v. Jennings, 68 
Ind. 232. ]3ut see Bowcn xk Mulford, 
10 N. J. L. 230, where a judgment for 
the plaintiff by default was set aside be- 
cause his middle name was not given in 
the summons, but was inserted in the 
declaration. 

In Conveyances. — The omission or in- 
sertion of, or even a mistake in, a per- 
son's middle name or initial in a con- 
veyance is unimportant, as between the 
parties thereto. Dunn v. Games, i Mc- 
Lean (U. S.) 321; Games v. Stiles, 14 
Pet. (U. S.) 322; Banks v. Lee, 73 Ga. 
25. See also Morgan v. Woods, 33 Ind. 
23. Co7itra, Dutton v. Simmons, 65 Me. 
583; s. c, 20 Am. Rep. 729. 

Different Rule in England.— The Eng- 
lish cases seem to attach more impor- 
tance to the middle name than do the 
American courts. Thus, in Kinnersley 
V. Knott, 7 Dowl. & L. 12S; s. c. 7 Com. 
B. 980; 13 Jur. 56S, where the defendant 
was sued as John M. Knott, a special 
demurrer to the declaration was sus- 
tained because the middle name was not 
given in full. A similar ruling was 
made in Nash v. Collier, 5 Dowl. & L. 
341, where the defendant was sued as 
William Henry W. Collier. See also 
Charter t). Charter, L. R., 2 Prob. Div. 
323. But in Rex v. Newman, i Ld. 
Raym. 562, an indictment was quashed 
because it gave the defendant two 
Christian names. 

5. State V. Martin, 10 Mo. 391; Diggs 



114 



Abbreviations. 



NAME. 



Abbreviations. 



And it has been held proper to strike out of a summons and 
complaint, on motion, the middle initial of the defendant's name.^ 
Some courts hold that while it is not necessary to give the middle 
name or initial, yet if either be given, a mistake therein is a fatal 
variance.^ The doctrine in Massachusetts is that the middle name 
is an essential part of the name, particularly in indictments, and 
its omission a misnomer.** 

v.' Abbbeviations. — Judicial notice will be taken of the ordinary 
and commonly used abbreviations and equivalents of Christian 
names; but it has been doubted whether this rule ought to be ex- 
tended to surnames.* 



V. State, 49 Ala. 311; Jernigan v. Car- 
ter, 60 Ga. 131. 

1. Griel v. Solomon, 82 Ala. 85; 60 
Am. Rep. 733. 

2. State V. Hughes, i Swan (Tenn.) 
261; Rockwell r'. State, 12 Ohio St. 427; 
Piice V. State, 19 Ohio 423; State v. 
Homer, 40 Me. 438; State v. Dudley, 7 
Wis. 664; Edmundson v. State, 17 Ala. 
179; s. c, 52 Am. Dec. 169; Erskine t'. 
Davis, 25 111. 251; Hart w. Lindsev, 17 
N. H. 235; s. c, 43 Am. Dec. 597; 
Miller v. People, 39 111. 457. 

3. Com. V. Perkins, i Pick. (Mass.) 
388; Cora. V. Hall, 3 Pick. (Mass.) 263; 
Com. V. Shearman, 11 Cush. (Mass.) 
546; Com. V. McAvoy, 16 Gray (Mass.) 
235; Terry v. Sisson, 125 Mass. 560. 

4. Fenton v. Perkins, 3 Mo. 144, 
cited in Jones' Estate, 27 Pa. St. 338. 
See also title Abbreviations, i Am. 
& Eng. Encyc. of Law 15. 

"The abbreviations of a man's given 
name are so common that, without any 
violence to the law of the land, the 
courts may take judicial notice of 
them." Tompkins, J., in Fenton v. 
Perkins, 3 Mo. 144. 

Instances. — In Weaver -■. McEIhe- 
non, 13 Mo. 89, the court judiciall3' no- 
ticed that "Christy" or "Christ" was an 
abbreviation of Christopher. See also 
Gordon v. Holiday, i Wash. (U. S.) 
285. "Jo" has been held to be equiva- 
lent to Joseph. Com. zk O'Baldwin, 
103 Mass. 210. "Polly" equivalent to 
Mary. Sowle v. Sowle, 10 Pick. 
(Mass.) 376; Com. v. Terry. 114 Mass. 
263. "Sally" equivalent to Sarah. 
Shelburne t>. Rochester, i Pick. (Mass.) 
470. "Th." equivalent to Thomas. 
Ogden V. Gibbons, 5 N. J. L. 51S, 531. 
And "Jack" or "Jock" equivalent to 
John. Walter v. State, 105 Ind. 5S9. 
Jane and Joan, and Jean and John are 
given in 2 Roll. Abr. 155, as being well 
recognized equivalents. 

II 



William and Wilhelm. — But in Becker 
V. German M. F. Ins. Co., 68 111. 412, 
the defendant was sued on a note as 
William Becker; the note was signed 
in German, Wilhelm Becker. The 
court held that the names were differ- 
ent both in spelling and in sound, and 
that the variance was fatal, notwith- 
standing the admitted fact that Wil- 
helm is the German equivalent of 
William. 

Ben. — Where the defendant was in- 
dicted bj- the Christian name of "Ben," 
the court, on appeal, held that the trial 
court properly refused to quash the in- 
dictment, saj'ing: "It seems to us that 
Ben may have been the true and full 
Christian name of the appellant. Ben 
is not necessarily a contraction of 
Benjamin, Benoni, Benedict, or any 
other name, and on the motion to 
quash, the court, we think, was right in 
assuming that Ben may have been the 
full Christian name of the appellant." 
Burton V. State, 75 Ind. 477. And see 
also People v, Ferguson, 8 Cow. (N. 
Y.) 120. 

Geo. — Where the defendant was de- 
clared against as "Geo. Turner," it %vas 
held a good plea in abatement to allege 
that his Christian name was George, 
and not "Geo." Wilson v. Shannon, 6 
Ark. 196. 

"Mr." — The court will not presume 
that the letters "Mr." placed before a 
person's surname constitute his Chris- 
tian name. Gatty v. Field, 9 Ad. & El., 
N. S. 631. 

"Mrs." — In condemnation proceed- 
ings an award to "Mrs. Kearsley" was 
set aside, on the ground that "Mrs." 
was not a legal name. Kearsley v. 
Gibbs,44 N.J. L. 169. 

Though a statute permits the de- 
scription of persons in indictments by 
one or more of the initials of the 
Christian name, and also permits the 



Corruptions, Derivatives 



NAME. 



and Freflzes. 



VI. Corruptions, Derivatives and Prefixes. — Where the deriva- 
tion of two names is the same, or where one is merely a corruption 
of the other and both are by common usage recognized as identi- 
cal, though they differ in sound, it is not a material misnomer to 
use one for the other.' 

Where surnames having a prefix are ordinarily written with an 
abbreviation, it is sufificient to write them in the same manner in a 
pleading.* 

VII. Pkesttmption that Letter Constitutes Name. — When a 
party or third person is. designated in a pleading, warrant or in- 
dictment by a surname preceded by one or more capital letters 
only, the court, in the absence of evidence, will not presume that 
he has any Christian name other than such letter or letters.* It 
was formerly held that this presumption would be indulged only 
where the letter given was a vowel,'* but under more recent 
decisions the rule seems to be established that a consonant, 
as well as a vowel, will be presumed to be an entire Christian 
name.^ 

use of either of two names by which a 
person is equally well known, yet it is 
error to rule as matter of law that a 
person is correctly described as "Mrs. 
C. Davis," because it is shown that her 
husband's name is C. Davis. The 
question whether she was well known 
by that name should have been sub- 
mitted to the jury. Davis v. State 
(Tex. 1889), II S. W. Rep. 647. 

Name of Railroad Company. — The 
court will not take judicial notice that 
the letters "C, B. & Q^ R. R. Co." 
mean the Chicago, Burlington & 
Quincey Railroad Company. Accolo 
■V. Chicago etc. R. Co., 70 Iowa 185. 

1. Wilkerson v. State, 13 Mo. gii 
s. c, 53 Am. Rep. 137; State -r;. Huston, 
15 Mo. 512; Gordon v. Holiday, i 
Wash. (U. S.) 285. 

"If two names are in original deriva- 
tion the same, and are taken promiscu- 
ously to be the same in common use, 
though they are different in sound, j-et 
there is no variance — as. Piers Griffith 
brought an audita querela, and out- 
lawry was pleaded by the name of 
Peter GriflBth and allowed." 15 
Viner's Abr., title Misnomer, p. 408. 

2. State V. Kean, 10 N. H. 347; s. c, 
34 Am. Dec. 162; Moynahan v. People, 
3 Colo. 367; People v. Tisdale, i Dougl. 
(Mich.) 59. 

To write a surname with an "M' " 
as "M'Neal" instead of McNeal, is no 
variance. Campbell v. WolflF, 33 Mo. 

459- 

3. State V. Webster, 30 Ark. 166; 
Burford v. McCue, 53 Pa. St. 427; 



Dana v. Fielder, 12 N. Y. 40; Fewlass 
V. Abbott, 28 Mich. 270; Oakley v. 
Pegley (Neb. 1S90), 46 N. W. Rep. 920, 
But see Frank v. Levie, 5 Robt. (N Y.) 
599, where it is said that the law does 
not recognize a single letter as a name, 

4. Vowel Initials. — Where a single 
vowel immediately precedes a surname, 
the court will understand such vowel to 
be the Christian name of the person re- 
ferred to. Kinnersley •i'.Knott,7 Com.B. 
980; s. c, 13 Jur. 658; Nash v. Collier, 5 
Dowl. & L. 341; Lom'^x v. Landells, 6 
Com. B. 577; s. c.,6 Dowl. & L. 396. In 
the case last cited, Maule, J., said that 
"a vowel, which is in itself a word, and 
may be pronounced separately, may be 
a name; though a consonant, which is 
incapable of being pronounced without 
the addition of a vowel, cannot." 

"I know no law, nor do I see any 
reason, why a man may not take the 
letters A W for his first name, or, as 
it is generally called, his Christian 
name; for as there is no union here be- 
tween church and state, and no obliga- 
tion on parents to baptize their chil- 
dren, this name may be as often changed 
as the patronymic." Colcock, J., in 
City Council v. King, 4 McCord L. (S. 
Car.) 487. 

Where the plaintiff sued as O. B. 
Abbott, and obtained judgment, it was 
held that it would not be presumed, for 
the purpose of invalidating the judg- 
ment, that he had any other Christian 
name. Fewlass v. Abbott, 28 Mich. 
270. 



5. Consonants. — Tweedy v. Jarvis, 27 



116 



Names of Bastards. 



NAME. 



Change of Name. 



VIII. Names of Bastaeds. — Until he has acquired one by repu- 
tation or adoption, a bastard has no surname, not even that of 
his mother. Probably, however, less evidence would be required 
to show that he had adopted his mother's name than that he had 
acquired a different one.* 

IX. Names of Divoeced Women. — A woman at marriage loses 
her own surname and acquires that of her husband ; and a subse- 
quent divorce a vinculo does not restore to her her former name.^ 

But by statute in many of the States the court granting the di- 
vorce may, at her instance, give her back her maiden name, or 
authorize her to adopt another.* 

X. Name of Month. — See note 4. 

XI. Change of Name — 1. Power of Courts. — In the United States, 
authority to change the names of persons or corporations has been 
very generally conferred upon courts of record." It has been held 
that the exercise of such power is discretionary with the court to 



Conn. 45, in which the court, per 
Storrs, C. J., said: "We see no sensi- 
ble or rational ground for any distinc- 
tion between a vowel and a consonant, 
and think that either of them may be a 
name; and that name is denoted by the 
sound by which it is called or pro- 
nounced when it is spoken or uttered 
audibly as a letter." To the same effect 
see Reg. v. Dale, 15 Jur. 657; s.c, 5 Eng. 
L. & Eq. 36o,in which case Lord Camp- 
bell remarked that he had been reliably 
informed that an individual had been 
baptized bv the name of "T." And in 
Kinnersley v. Knott, 6 M. G. & S., a 
person was reported as having been 
christened "J." 

In Perkins v. McDowell (Wyo. 
i8go), 23 Pac. Rep. 71, the plaintiff 
sued as "J. M. McDowell," and, on de- 
murrer, the court, per Van Devanter, 
C. J., said: "While it does not occur 
frequently, there are many instances 
where single letters constitute the only 
Christian name. We cannot, then, 
judicially know that the letters "J. M." 
are not a name, and, as the petition 
does not disclose that the letters "J. M." 
are not the Christian name of the plain- 
tiff, it follows that there is no defect 
apparent on the face of the petition in 
this respect." 

In Breedlove-y. Nicolet, 7 Pet. (U. S.) 
413, where the plaintifTs name as given 
in a pleading was "J. J. Sigg," and ob- 
jection thereto was raised for the first 
time on writ of error, Mr. Chief Jus- 
tice Marshall said: "He may fiave 
assumed the letters 'J. J.' as distin- 
guishing him from other persons of the 
surname of Sigg. Objections to the 



name of the plaintiff cannot be taken 
advantage of after judgment." 

1. Rex V. Clark, Russ. & Ry. 358; 
Rex V. Waters, i Mood. C. C. 457; 
Rex V. Smith, i Mood. C. C. 295; s. c, 
6 Car. & P. 151; Rex v. Sheen, 2 Car. 
& P. 634; Reg. V. Evans, 8 Car. & P. 
765; Wakefield f. Mackey, i Phill. 133; 
Shannon v. People, 5 Mich. 71: Wright 
V. Wright, 2 Mass. 109; i Russ. Cr. 
(3rd Eng. ed.) 656; i Bishop Crim. 
Proc. (3rd ed.), § 686. 

2. Fendall v. Goldsmith, 2 P. D. 263. 

3. Resumption of Maiden Name. — The 
court has jurisdiction to decree a re- 
sumption by the wife of her former 
name in Massachusetts^ Vermont^ 
Rhode Island, Connecticut, Ohio, Illi- 
nois, Kentucky, Texas, Washington and 
District of Columbia. But in Minne- 
sota, Missouri, Arkansas and Ne- 
vada, only in actions where the wife is 
plaintiff. In Oregon, if she is not in 
fault. Stimson's Am. Stat. Law, ^6242. 

4. Tetruary. — In an indictment the 
name of the month was written, appar- 
ently, "Tebruary." A motion to quash 
01) this ground was held properly over- 
ruled, as the court judicially knew that 
there was no month beginning with 
the letter T, and would presume that 
the letter was meant for an F. Witten 
V. State, 4 Tex. App. 70. 

6. Constitutional Provisions. — Local 
or special laws changing the name of 
any person are forbidden in Arkansas, 
California, Florida, Illinois, Indiana, 
lotva, Kentucky, Louisiana, Mary- 
land, Minnesota, Misssouri, Nebraska, 
Nevada, New Tork, North Carolina, 
Oregon, Pennsylvania, Tennessee, 



117 



Bight to Adopt Any Name. 



NAME. 



Eight of Property in Names, 



which appHcation for the change is made, and that its decision is 
reviewable only in case of manifest abuse of discretion. ^ 

2. Effect of Change. — A person by taking a new name under an 
act of parliament does not lose his original name ; the grant is a 
permission, but not an obligation, to adopt and use the new 
name.* 

XII. Right to Adopt Any Name.-^A person maiy legally name 
himself, or change his name, or acquire one by reputation, general 
usage or habit.^ So, in the absence of fraud, a person may do 
business and execute contracts under any name he chooses to 
assume.* , 

XIII. Eight to Name Child. — It has been held that this right 
belongs to the father, and that it is of sufficient pecuniary value to 
furnish a valid consideration for a note giveji to the father by a 
third person for the privilege of conferring the maker's name upon 
the payee's child. ^ 

XIV. Right of Property in Names.** — At common law there is no 
property right in any person to the use of a particular name as a 



Texas, Virginia and Wisconsin. 
Several States forbid special laws 
changing name of place: California, 
Illinois, Missouri, Nebraska, Penn- 
sylvania and Texas. In Tennessee the 
legislature is prohibited from changing 
the names of persons, but is required to 
confer such power upon the courts. 
Stimson's Am. Stat. Law, §§ 395, 

432- 

Facts Required to be Shown. — The 

rule in the New York common pleas 
was stated to be to require a statement 
showing whether the applicant for the 
change is married or single, whether 
any judgments e-xist or actions are 
pending against him, whether there is 
any outstanding commercial paper in 
the name sought to be abandoned; and 
also showing the applicant's age and 
birthplace, and the names of his parents. 
Matter of Hamilton, 10 Abb. N. Cas. 
(N. Y.) 79. See also Petition of John 
Snook, 2 Hilt. (N. Y.) 566. 

1. In re United States Mercantile 
Reporting etc. Co., 115 N. Y. 176; 
Petition of Snook, 2 Hilt. (N. Y.) 566; 
Matter of Hamilton, 10 Abb. N. Cas. 
(N. Y.) 79. 

2. Leigh XK Leigh, 15 Ves. 100. 

3. England t;. New' York Publishing 
Co., 8 Daly (N. Y.) 375; Citv Council 
V. King, 4 McCord L. (8. Car.) 487. 

In Doe V. Yates, 5 Barn. & Aid. 
544, Abbott, C. J., said: ''A name 
assumed by the voluntary act of a 
young man at his outset in life, adopted 



by all who know him, and b^' which he 
is constantly called, becomes, for al! the 
purposes that occur to my mind, as 
much and effectuallj' his name as if he 
had obtained an act of parliament to 
confer it on him." See also Matter of 
Snook, 2 Hilt. (N. Y.) 566. 

Patronymic Not Binding. — No person 
is bound to accept his patronymic as a 
surname, nor his Christian name as a 
given name, though the custom to do 
so is almost universal among English- 
speaking people who have inherited 
the common law." Biddle, J., in 
Schofield V. Jennings, 68 Ind. 233. See 
also City Council v. King, 4 McCord. 
L. (S. Car.) 487. 

4. Bell V. Sun Printing Co., 42 N. Y. 
Super. Ct. 567; petition of Snook, 2 Hilt. 
(N. Y.) 566, 

Eight to Sue Under Adopted Name. — A 
girl who has been taken into a family 
and treated in all respects as a daughter, 
though not formally adopted, may use 
the family name as her own in a suit 
against the head of the family. Watson 
V. Watson, 49 Mich. 540. 

As to unlawful assumption and use of 
names, see titles False Pretences, 7 
Am. & Eng. Encyc. of Law; Forgery, 
8 Am. & Eng. Encyc. of Law; Trade- 
marks. 

5. Wolford V. Powers. 85 Ind. 294; s. 
c, 44 Am. Rep. 16; Parks v. Francis, 50 
Vt. 626; s. c , 28 Am. Rep. 517. 

6. See title Corporations, 4 Am. & 
Eng. Encyc. of Law 206. 



118 



Marriage Under 



NAME. 



Fictitious Name. 



surname, to the extent of enabling him to prevent the assumption 
of the same name by another person. ^ 

Nor is there any property right in a name given to a piece of 
real property or to a private dwelling, which would warrant an 
injunction against the use of such name by others, in connection 
with their own property.^ 

XV. Maeeiage UlTDEE FlCTITIOTlS NAME. — The mere fact that the 
name under which a person assents to a formal contract of mar- 
riage is not his true name, does not affect the validity of the 
marriage, even though it was preceded by publication of banns. ^ 

But if the fictitious name be used in furtherance of a fraudulent 
scheme, and for the purpose of deceiving as to identity, it may, 
together with the attendant circumstances, render the marriage 
voidable at the instance of the innocent party.* 

XVI. IiAND Office Peoceedinos. — The commissioners may cor- 
rect an error in a land certificate stating wrongly the Christian 
name of the owner; and may do this where a patent, since re- 
turned for cancellation, has issued in the wrong name.^ 

XVII. Identity. — -The presumption, subject to some exceptions, 
is that identity of name — by which is meant identity of both 
Christian name and surname — prima facie establishes identity of 
person, and casts upon the adverse party the burden of proving 
the contrary.^ 



1. Du Boulay v. Du Boulay, 2 L. R., 
P. C. 430; s. c, 17 W. R. 594; 6 Moore 
P. C. C, N. S.31; 38L.J., P. C.3S. 

2. Da3' V. Browning, 10 Ch. Div.294, 
302; s. c, 48 L. J. Ch. 173; 39 L. T. 553, 
reversing the decision of the vice chan- 
cellor in 39 L. T. 226. This was a pe- 
culiar case, and probably the only one 
of its kind ever reported. The plaintiff 
was the proprietor of a certain residence 
property which had for many years 
been known and called by the name of 
"Ashford Lodge." The defendant 
owned an adjoining residence, which 
had for nearly an equally long period 
of time been called "Ashford Villa." 
In 1876 the defendant, for some reason 
which does not appear in the report of 
the case, changed the name of his resi- 
dence to Ashford Lodge, the name so 
long used by the plaintiff, who brought 
an action to enjoin the use of those 
particular words as a designation or 
name for the defendant's residence, al- 
leging irreparable damage, etc. The 
defendant interposed a general demur- 
rer, which the vice chancellor, Malins, 
overruled; but on appeal from that or- 
der, all the judges agreed that the de- 
fendant's conduct, however unneigh- 
borlv or reprehensible from an ethical 
point of view, did not constitute an 

] 



infringement of any property right of 
the plaintiff; and that the demurrer 
should have been sustained. 

As to propert3' rights in trade names 
and trademarks, see title Trademarks. 

3. Rex V. Inhabitants of Billingshurst, 

3 M. & S. 250; Rex V. Inhabitants of 
Burton-upon-Trent, 3 M. & S. 537. 

4. Rex V. Inhabitants Burton upon- 
Trent, 3 M. & S. 537; Rex v. Wroxton, 

4 B. & Ad. 640; s. c, 24 Eng. C. L. 131. 
See also consistory court decisions in 
Frankland v. Nicholson, and Pougett v. 
Torakyns, cited in note to Rex v. In- 
habitants of Billingshurst, 3 M. & S. 
250. 

"5. Bell ». Hearne, 19 How. (U. S.) 
252. 

6. See title Identity, 9 Am. & Eng. 
Encyc. of Law 863 et seq. McConeghj' 
-'. Kirk, 68 Pa. St. 200; Clark v. Free- 
man, 25 Pa. St. 133; Stebbins v. Dun- 
can, 108 U. S. 32; Jackson v. Cod_y, 9 
Cow. (N. Y.) 140; Hatcher v. Roche- 
leau, iSN. Y.86; Jackson ». Christman, 
4 Wend. (N. Y.) 277; State v. Moore, 6i 
Mo. 276; Cross V. Martin, 46 Vt. 14; 
Jackson v. King, 5 Cow. (N. Y.) 237; s. 
c, 15 Am. Dec. 468; Atchison xk Mc- 
Culloch, 5 Watts (Pa.) ,13; Douglass v. 
Dakin, 46 Cal. 49; Brown v. Metz. 33 111. 
339; Cates V. Loftus, 3 A. K. Marsh. 
19 



Identity. 



NAME. 



Identity. 



Identity will be presumed if the names sound alike, within the 
rule of ideui sonans, even though there be slight differences in the 
spelling. '^ 



(Ky.) 202; Hubbard f. Lees, L. R., i 
Ex. 255; Burns v. Hyatt, i Pa. L.J. 323; 
Bogue V. Bigelow, 29 Vt. 183; Fletcher 
V. Conlj', 2 Greene (Iowa) 88. Compare 
Wilson V. Holt, 83 Ala. 528; Ward v. 
Dougherty, 75 Cal. 240; People v. Lake, 
no N. Y.61. 

Identity of person will not be pre- 
sumed from identity of initials and sur- 
name. The People v. Smith, 3 Lans. 
(N. Y.) 298. See also People ». Fergu- 
son, 8 Cow. (N. Y.) 102; Zeller v. State, 
7 Ind. 659. 

In Hatcher v. Rocheleau, 18 N. Y. 
86, the court held that identity of name 
was prima facie evidence that a person 
sued in Neiu Terk In 1857 was the same 
person who was sued by that name in 
Mississippi in 1841. 

In Aultman v. Zimm, 93 Ind. 158, the 
court held that proof showing the lia- 
bility of a person bearing the defend- 
ant's name, in the absence of counter- 
vailing evidence as to the identity of 
the person, is sufficient to establish the 
defendant's liability. 

Identity of Name Raises a Presumption 
of Identity of Person. — Goodell v. Hib- 
bard, 32 Mich. 47; Campbell v. Wallace, 
46 Mich. 320; State v. Moore, 61 Mo. 
276. 

And where the identity is clearly 
established, the use of a different name 
by a party is not material where the 
question is one of identity merely. 
Boyce v. Dauz, 29 Mich. 146; Bothe v. 
Dayton etc. R. Co., 37 Ohio St. 147. 
If denied, the identity may be proved, 
and if the bill is taken as confessed the 
identity is admitted. Ramsdell v. Eaton, 
12 Mich. 117. 

Beturn of a Commission EstabUslieB 
Identity. — A commission to take a depo- 
sition, directed to " Messrs. Swan & 
Moore, attorneys at law," of Ottawa, 
etc., was returned with a certificate of 
execution signed "J. J. Moore, C.J. 
Swan, commissioners." Held, That an 
objection to the reading of the deposi- 
tion in evidence, on this ground, raises 
only a question of identity of persons, 
and is untenable where the return estab- 
lishes such identity. Eaton v. Peck, 26 
Mich. 57, 

Objection to Identity Cannot First be 
Raised in the Supreme Court. — Objection 
to the identity of a person cannot be 
raised for the first time in the supreme 



court, on account of the use of the 
initial letters of proper names in the 
assessment made by the commissioners 
in such proceedings. Houk v. Barthold, 
73 Ind. 21 

Presumption When Initials Only Are 
Used. — A suit brought and judgment 
rendered in the name of the plaintiff' by 
initials only for his given name, is not 
open to objection on that ground, in the 
absence of any showing that he had any 
other name; it will not be presumed for 
the sake of invalidating such judgment 
that the plaintiff has any other Christian 
name than the initials used in bringing 
the suit. Fewlass v. Abbott, 28 Mich. 
270. 

Proof of Identity of Names and Per- 
sons. — See Identity, 9 Am. & Eng. 
Encyc. of Law 866, 867. 

See also Com. v. Gale, 11 Gray 
(Mass.) 320; Berber v. Kerzeinger, 23 
111. 286; Jackson v. Goes, 13 Johns. (N. 
Y.) 518; s. c, 7 Am. Dec. 399; Jackson 
V. Stanley, 10 Johns. (N. Y.) 136; s. c, 
6 Am. Dec. 319. 

After a lapse of twenty-five years, 
identity' of name is not sufficient evi- 
dence of personal identity. Sailor v. 
Hertzogg, 2 Pa. St. 182. See also Sitler 
V. Gehr, 105 Pa. St. 577; s. c, 51 Am. 
Rep. 207. 

" The reason given for casting the 
onus on the party who denies [the iden- 
tity] is that disproof can be readily had 
bj' calling the person wliose identity is 
contested into court." Sailor v. Hert- 
zogg, 2 Pa. St. 183, per Gibson, C. J. 

But identity of name, without more, 
was held not sufficient to upjiold at- 
tempted justification in libel. Regens- 
perger v. Kiefer, 20 W. N. C. (Pa.) 97. 

It is error to submit to the jury, with- 
out other proof, whether R. P. O'Neil, 
who executed a deed, is identical with 
Rev. Patrick O'Neil, the owner of the 
land. Burford v. McCue, 53 Pa. St. 
427. 

Where an instrument is signed "Adam 
Lautermilch," the identity of the as- 
signor with one John Adam Lautermilch 
is for the jury, the writing agreeing in 
"other respects with the presumption of 
identity. Lautermilch v. Kneagy, 3 S. 
& R. (Pa.) 200. 

1. Kelly v.YsXney (Pa.), 5 Pa. Law 
Jour. 300; s. c, 2 Am. Law Reg. 499; 
Jackson v. Cody, 9 Cow. (N. Y.) 140. 



120 



Sex. NAME. Junior and Senior. 

It will not be presumed, however, that a plaintiff and de- 
fendant,^ or an obligor and obligee,* or a subscribing witness and 
a surety,^ are, respectively^ the same person merely because of 
identity of name. 

If the surname in question be a very common one, and the 
Christian name not unusual, the courts have a disinclination to 
apply the rule.* 

XVIII. Sex. — It would seem that the well known fact that a 
large number of Christian names are invariably conferred only upon 
persons of a particular sex would become a matter of judicial 
notice ; but so far as the reported cases show, the courts are not 
disposed to indulge a presumption as to sex merely from the 
nature of the Christian name. Thus, it has been held that the 
name " Jo" does not designate the sex of the person referred to.^ 
Nor will the court say, as a matter of judicial knowledge, that 
the Christian name, Lawrence, does not designate a female.® 

XIX. Jtoioe and Senioe. — The word Junior, or Jr., or words of 
similar import, are ordinarily mere matter of description, and no 
part of a person's legal name ; and to improperly add or omit 
them is harmless error, whether in civil or criminal proceedings.' 
So of the word Senior, or Sr.* 

Where there are two persons residing in the same place, and 
having the same Christian name and surname, and one of them 
uses the addition Jr., or " the second," they will be presumed to 
be father and son.® 

So, where father and son living in the same locality have the 
same Christian name and surname, it will be presumed, in the ab- 

1. Suttles V. Whitlock. 4 T. B. Mon. 7; Kincaid v. Howe, 10 Mass. 203; State 
(Ky.) 452. 17. Grant, 22 Me. 171; Coit v. Stark- 

2. Allen v. Shadburne, i Dana weather, 8 Conn. 293; Fleet r). Youngs, 
(Ky.) 69. II Wend. (N. Y.) 522; Prentiss v. 

3. Jones v. Chappell, 5 T. B. Mon. Blake, 34 Vt. 465; Brainerd v. Stilphin, 
(Ky.) 421;; Jackson v. Christman, 4 6 Vt. 9; s. c, 27 Am. Dec. 532; Keith 
Wend. (N. Y.) 277. v. Ware, 6 Vt. 680; Blake v. Tucker, 

4. Jones v. Jones, 9 M. & W. 75; 12 Vt. 39; Jameson v. Isaacs, 12 Vt. 
Jackson v. Christman, 4 Wend. (N. 611; Isaacs i;. Wiley, 12 Vt. 677; John- 
Y.) 277. son V. Ellison, 4 T. B. Mon. (Ky.) 526; 

-5. Crawford xk Slye, 4 Cranch C. C. s. c, 16 Am. Dec. 163; Headley v. 

(U. S.) 457. But see Com. v. O'Bald- Shaw, 39 III, 354; State v. Weare, 38 

win, 103 Mass. 210, which holds that N. H. 314. 

"Jo." will be presumed to mean Joseph, Second of that Name. — Where the 

a male. ownership of stolen goods was laid in 

6. LaMotte v. Archer, 4 E. D. Smith W. R., "the second of that name," and 
(N. Y.) 46. the proof showed that he was generally 

7. Hodgson's Case, i Lewin C. C. known as W. R., Jr., it was held that 
236; Rex V. Bailey, T. C. & P. 264; Le- there was no variance. Com. v. Pai*- 
piot V. Browne, i Salk. 7; Geraghtj' v. menter, loi Mass. 211. 

State, no Ind. 103; Ross v. State, 116 8. Neil v. Dillon, 3 Mo. 59; People v. 

Ind. 495; People v. Cook, 14 Barb. (N. Collins, 7 Johns. (N. Y.)'549; Fleet v. 

Y.) 259; People V. Collins, 7 Johns. (N. Youngs, 11 Wend. (N. Y.) 522. 

Y.) 549; Padgett v. Lawrence, 10 9. Cross v. Martin, 46 Vt. 14, where 

Paige (N. Y.) 170; s. v,., 40 Am. Dec. a deed from Elijah Gore, of Halifax, to 

232; Com. V. Perkins, ■ Pick. (Mass.) Elijah Gore Jr., of Halifax, was pre- 

388; Cobb V. Lucas, 15 Pick. (Mass.) sumed to be from father to son. 

121 



Doctrine of Idem Sonans 



NAME. 



statement of the Bule. 



sence of some such addition as Junior, or "the younger," that 
process issued against a defendant of that name is intended for 
the father.^ 

XX. Doctrine of Idem Sonans — 1. Statement of the Rule. — The 
absence of a set of definite rules for the spelUng and pronuncia- 
tion of the names of persons, and more especially of surnames, has 
led the courts to the adoption of a principle known as " the rule 
of Idem Sonans!' This rule may be stated to be, that absolute 
accuracy in spelling names is not required in legal documents or 
proceedings, either civil or criminal ; that if the name as spelled in 
the document, though different from the correct spelling thereof, 
conveys to the ear when pronounced according to commonly 
accepted methods, a sound practically identical with the sound of 
the correct name as commonly pronounced, the name as thus 
given is a sufficient designation of .the individual referred to, and 
no advantage can be taken of the clerical error.^ In other words. 



1. Jarmain v. Hooper, 6 M. & G. S27; 
s. c, I Dowl. & L. 769; 7 Scott, N. R. 
663; Stebbing v. Spicer, 8 M. G. & S. 
827; Bate V. Burr, 4 Harr. (Del ) 130; 
Brown v. Benight, 3 Blackf. (Ind.) 39; 
s. c, 23 Am. Dec. 373; Lepiot v. 
Brown, i Salk.7; Singleton t'. Johnson, 
9 M. & W. 67. See also State v. Vit- 
tum, 9 N. H. 519; Cobb v. Lucas, 15 
Pick. (Mass.) i; State v. Grant, 22 Me. 
171; Com. -v. Beckley, 3 Mete. (Mass.) 
330; Kincaid v. Howe, 10 Mass. 203; 
Com. V. Perkins, i Pick. (Mass.) 3S8; 
State V. Weare, 38 N. H. 314; People 
V. Collins, 7 Johns. (N. Y.) 549; Stev- 
ens V. West, 6 Jones L. (N. Car.) 49; 
Fleet V. Youngs, 11 Wend. (N. Y.) 
522; Padgett V. Lawrence, 10 Paige (N. 
Y.) 170; s, c, 40 Am. Dec. 232; Allen 
V. State, 52 Ind. 486; Brainerd xi. Stil- 
phin, 6 Vt. 9; s. c, 27 Am. Dec. 532; 
Hadley v. Shaw, 30 111. 354. 

It seems that where father and son 
of the same name reside in the same 
town, the omission of "Junior" in a 
writ against the son is good cause of 
abatement. Zuill v. Bradley, Quincy 
(Mass.) 6. 

But in Simpson v. Dix, 131 Mass. 
179, it was held that where a convey- 
ance is made to a grantee of a certain 
name, and there are two persons, father 
and son, of that name, no presumption 
will be indulged in that the convey- 
ance is to the father; and the evidence is 
admissible to show who was in fact in- 
tended as the grantee. 

2. Leatherbarrow v. Ward, 1; Tur. 
3SS. 

Definitions. — "The proper rule in 
such cases is that if two names, accord- 



ing to the ordinary' rules of pronouncing 
the English language, may be sounded 
alike, without doing violence to the 
letters found in. the variant orthogra- 
phy, then the variance is, prima facie, 
at least, immaterial, and may be so de- 
cided by the court. And in the pro- 
nunciation of proper names, greater 
latitude is indulged than in any other 
class of words." Somerville, J., in 
Rooks IK State, 83 Ala. 79. 

"The law- does not take notice of 
orthography; therefore, if a name is 
mispelled, no harm can come of this, 
provided the name as written in the In- 
dictment is idem sonans, as the books 
express it, with the true name. It is 
sometimes a nice matter to determine 
when the names are of the same sound; 
and the courts do not, in this matter, 
hold the rule of identity with a strict 
hand." i Bish. Crim. Proc, § 688. 

"Courts are not fastidious in enforc- 
ing absolute precision in regard to 
orthography. Names admitting of the 
same pronunciation are often made up 
of very different letters. In these 
cases, a mistake of one mode of spelling 
for another is unimportant, even in an 
indictment. The. public prosecutor is 
not bound to ascertain the particular 
letters used by the accused in writing 
his name, for this might often be im- 
practicable." Mason, C. J.,in Donnel 
V. United States, i Morris (Iowa) 141; 
o. c, 39 Am. Dec. 457. 

"It matters not how two names are 
spelled, what their orthography is, 
they are idem sonans within the mean- 
ing of the books, if the attentive ear 
finds difficulty in distinguishing them 



122 



Doctrine of Idem Sonans. 



NAME. 



statement of the Rule. 



when pronounced, or common and long 
* continued usage has by corruption or 
abbreviation made tliem identical in 
pronunciation," Robson v. Thomas, 
55 Mo. sSi. 

"In the use of foreign names, courts 
should not pronounce that a variance, 
unless it be palpable, vfhich maj be 
only a misspelling or a mispronuncia- 
'tion." Chiniquy v. Catholic Bishop, 
41 111. 148. 

Instances of Idem Sonans. — In the 
following cases, the names in conjunc- 
tion have been held to be within the 
rule of idem sonans, or to be immate- 
rially variant in sound: 

A. — Allessandro and Alexander (the 
English equivalent). Alexander v. 
Com.. 105 Pa. St. 1. Anthron and An- 
trum. State V. Scurry, 3 Rich. (S. Car.) 
68. Adamson and Adanson. James v. 
State, 7 Blackf. (Ind.) 325'. Annie and 
Anny. State v. Upton, i Dev. (N. 
Car.) 513. Amel and Amiel. People 
V. Gosch (Mich. 1890), 46 N. W. Rep. 

lOI. 

B. — Bobb and Bubb (local usage). 
Mj'er V. Fegaly, 39 Pa. St. 429; s. c, 
80 Am. Dec. 534. Booth and Boothe. 
Jackson v. State, 74 Ala. 26. Brearley 
and Brailey. People v. Gosch (Mich. 
1890), 46 N. W. Rep. loi. Bert Sam- 
rud and Bernt Sannerud. State v. 
Sannerud, 38 Minn. 229. Barnabus 
and Barney. McGregor v. Balch, 17 
Vt. 562. Beneux and Bennaux. Ben- 
eux V. State, 20 Ark. 97. Boge and 
Bogue. Bogue v. Bigelow, 29 Vt. 179. 
Beckwith and Beckworth. Stewart v. 
State, 4 Blackf. (Ind.) 171. Boyce and 
Bice (as pronounced by foreigners). 
Boyce v. Danz, 29 Mich. 146. Blank- 
enship and Blackenship. State v. 
Blankenship, 2i Mo. 504. Bikerstoffe 
and Bickerstaffe. Heskett v. Lee, i 
Vent. 73. Benedetto and Beniditto. 
Abitbol V. Benedetto, 2 Taunt. 401. 
Burdet and Boudet or Boredet. Aaron 
V. State, 37 Ala. 106; Bryon and 
Bryan. Tyser v. Bryan, 2 Dowl. 640. 

C. — Chin Chan and Chin Chang. 
Wells V. State, 4 Tex. App. 20; Conly 
and Conolly. Fletcher v. Conly, 2 
Greene (Iowa) 88. Chatam and 
Chatham. Roth v. State, 4 Tex. L. J. 
393. Chambles and Chambless. Ward 
V. State, 28 Ala. 53. Conklan and 
Conklin. Cutting v. Conklin, 28 111. 
506. Cuffy and Cuffee or Cuff. State 
V. Farr, 12 Rich. (S. Car.) 24. Charles- 
town and Charleston. Alvord v. 
Moffat, 10 Ind. 366. Conn and Coen. 
Mooref. Anderson, 8 Ind. 18. Chicopee 



and Chickopee. Cora. v. Desmarteau, 

16 Gray (Mass.) i; Conavvay and Con- 
avay. Conaway -o. Hays, 7 Blackf. 
(Ind.) 159. Che-gaw-go-quay and Che- 
gaw-ge-quaj'. Brown v. Quinlandy75 
Mich. 289. Colburn and Coburn. Col- 
burn V. Bancroft, 23 Pick, (Mass.) 57. 

D. — Danner and Dannaher. Gahan 
V. People, 58 111. 160. Deadema and 
Diadema. State v. Patterson, 2 Ired. 
(N. Car.) -346; s. i,., 38 Am. Dec. 699. 
Donly and Donnelly. Donnelly v. 
State, 78 Ala. 453. Doerges, Dierges, 
and Dierkes. Gorman v. Dierkes, 37 
Mo. 576; Droun and Drown. Com. v. 
Woods, loGray (Mass.)477. Dixon and 
Dickson. Reading v. Waterman, 46 
Mich. 107. Dillahunty, Dillahinty, and 
Dillaunty. Dillahunty' v. Davis (Tex. 
1889), 12 S. W. Rep. 55. 

E. — Eraonds, Emmons, and Emmens. 
Lyon V. Kain, 36 111. 362. Edmundson 
and Edmindson. Edmundson v. State, 

17 Ala. 179; s. c, 52 Am. Dec. 169; 
Elliott and EUett. Robertson v. Win- 
chester, 85 Tenn. 171. 

F. — Fain and Fanes. State v. Hare, 
95 N. Car. 682. Fauntleroj' and Fon- 
tleroy. Wilkes v. State, 27 Tex. App. 
381. February and Tebruary. Witten 
V. State, 4 Tex. App. 70. Forrest and 
Fourai (as pronounced in French). 
State V. Timmens, 4 Minn. 325. Fin- 
negan and Finegan. People v. May- 
worm, 5 Mich. 146. Fayelville and 
Fayetteville. United States v. Hin- 
man, i Bradw. (111.) 292. Foster and 
Faster. Foster v. State, i Tex. App. 

.S33- 

G. — George Rooks and George W. 
Rux. Rooks V. State, 83 Ala. 79. Gid- 
dings, Gidings and Gidines. State v. 
Lincoln, 17 Wis. 597. Gardiner and 
Gardner. Rector v. Taylor, 12 Ark. 
128. ' Geesler and Geissler. Cleaveland 
V. State, 20 Ind. 444. Girous and Ger- 
oux. Girous 7.'. State, 29 Ind. 93. 

H. — Hearn and Hearne. Coster v. 
Thomason, 19 Ala. 717. Hicks Now- 
ells and Hix Nowels. Spoonemore v. 
State, 25 Tex. App. 358. Hinsdall and 
Hinsdale. Meredith v. Hinsdale, 2 
Cai. (N. Y ) 362. Heremon and Har- 
riman. State v. Bean, 19 Vt. 530. 
Hanley and Hanly. Irvin k. Sebastian, 
6 Ark. 33. Haverly and Havely. State 
V. Havely, 21 Mo. 498. Hudson and 
Hutson. State v. Hutson, 15 Mo. 512; 
Cato V. Hutson, 7 Mo. 142. Joel D. 
Hubbard (correct name), J. D. Hubba, 
J. D. Huba and J. D. Hub (names 
written on ballots). Gumm v. Hub- 
bard, 97 Mo. 311. 



123 



Doctrine of Idem Sonans. 



.NAME. 



statement of the Bnle. 



I. — Isah and Isaiah. Ellis v. Merri- 
man, 5 B. Mon. (K3'.) 297. 

J. — Jacob and Jaacob. Jacob Aboab's 
Case, I Mod. 107. Japheth and Japh- 
ath. Morton v. McClure, 22 111. 257. 
Jefferds, Jeflfards and Jervais. Cora. v. 
Brigham, 147 Mass. 414. Josiah and 
Josicr. Schooler v. Asherst, i Litt. 
(Kj-.) 217; s. c, 13 Am. Dec. 232. Juli 
and Julee. Point v. State, 37 Ala. 148. 

K. — Kamberling and Kimberling. 
Houston V. State, 4 Greene (Iowa) 437. 
Kenney and Kinnej. Kinney v. Har- 
rett, 46 Mich. 87. Kay and Key. 
Deckenson v. Bower, 16 East 112. 
Kealiher, Keoliher, Kelliher, Kellier, 
Keolhier and Kelhier. Millett v. 
Blake, 81 Me. 531. Kreitz, Krietz, 
Critz and Crit. Kreitz v. Behrens- 
nieyer, 125 111. 141. 

L, — LancasterandLancester. Anony- 
mous, All. 91. Lebering and Lebrun, 
or Lebring. Kentland v, Admr., 2 
Wash. (U. S.) 201. Lawrence and 
Lawrance. Webb v. Lawrence, 2 
Dowl. P. C. 81; s. c, I Crompt. & M. 
806. Lawson and Lossene. State v. 
Pullens, 81 Mo. 387. Little and Lytle. 
Lytle V. People, 47 111. 422. Leaphardt 
and Leaphat. Leaphardt v. Sloan, 5 
Blackf. (Ind.) 278. Langford and 
Lankford. State v. Mahan, 12 Tex. 
283. Louis and Lewis. Girous v. 
State, 29 Ind. 93; Block v. State, 66 
Ala. 493. T. C. Lucky and C. C. 
Lucky. Brown v. State, 32 Tex. 134. 

M. — Mary Etta and Marietta. Goode 
V. State, 2 Tex. App. 520. Michael 
and Michaels. State v. Houser, Busb. 
(N. Car.) 410. Minner and Miner. 
Jackson XK Boneham, 15 Johns. (N. Y.) 
226. McDonald and McDonell. Mc- 
Donald V. People, 47 111. 533. Mc- 
Laughlin and McGloflin. McLaughlin 
v. State, 52 Ind. 476. McGinnis and 
Mclnnis. Barnes v. People, 18 111. 52; 
s. c, 65 Am. Dec. 699. McGilligan and 
Megilligan. Pope v. Kirchner, 77 Cal. 
152. Marres and Mars. Com. z). Stone, 
103 Mass. 421. McNicole and Mc- 
Nicoll. Rex v. Wilson, 2 C. & K. 527. 
Me^'er, Meyers and Mayer. Smurr v. 
State, 88 Ind. 504. Mozer and Mou- 
seuer. Ruddell v. Mozer, i Ark. 503. 
See also McAllister v. Clark, 86 111. 

237- 

N. — Nowels and Nowells. Spoone- 
more t;. State, 25 Tex. App. 358. Nunne 
and Nonne. Nonne v. Maxey, 2 Jo. 
219. Newton, Nuton and Newten. 
Newton v. Newell, 26 Minn. 529. 

O. — Owen D. Haverl3' and Owens D. 
Havely. State v. Havely, 21 Mo. 498. 



P.— Poll and Pollv. McAllister v. 
Clark, 86 111. 236. Philip and Pilip. 
Taylor v. Rogers, i Ala. 197. Penryn 
and Pennj'rine. Elliott v. Knott, 14 
Md. 121. Patterson and Petterson. 
Jackson v. Cody, 9 Cow. (N. Y.) 140. 
Petris and Petrie. Petrie v. \Vood- 
worth, 3 Cai. (N. Y.) 219. Preyer, 
Prior and Pryor. Page v. State, 61 
Ala. 16. 

R. — Reed and Read. State v. Pott, 9 
N. J. L. 32; s. c, 17 Am. Dec. 444. 
Rae and Wray. Vance v. Wray, 3 
Upp. Can. L. J. 69. RennoU and Ren- 

nolls. V. RennoUs, i Chitty 

659. Robinson, Robertson and Rober- 
son. Winkerson v. State, 13 Mo. 91; 
s. c, 53 Am. Dec. 137. Robinson and 
Robison. People v, Cooke, 6 Park. Cr. 
(N. Y.) 31. Rooks and Rux. Rooks 
V. State, 83 Ala. 79. Rombauer and 
Rambauer. Patmor v, Rombauer, 41 
Kan. 29J. 

S. — Sarmine and Sarmin. Cull v. 
Sarmin, 3 Lev. 66. Saffell and SafBe. 
Hoffman v. Bircher, 22 W. Va. 537. 
Segear and Segar. Brunger v. Segar, 
I Roll. 425. Segrave and Seagrave. 
Williams v. Ogle, 2 Strange 889. Sha- 
croft and Shacraft. Denner v. Sha- 
croft, Cro. Eliz. 258. Shafer and 
Shaffer. Rowe v. Palmer, 29 Kan. 
337. Shields and Sheals. Shield's Es- 
tate, 3 Luz. Leg. Obs. (Pa.) 174. Staf- 
ford and Stratford. Wilson v. Stafford, 
Chitty 355. Steven Stebbins and 
Stevens Stebins. Stevens v. Stebbins, 
4 111. 25. St. Clair and Sinclair. Riv- 
ard V. Gardner, 39 111. 125. Storrs and 
Stores. People v. Sutherland, 81 N. 
Y. I. Sunderland and Sandland. 
Sandland v. Adams, 2 How. Pr. (N. 
Y,) 31. Susan and Susannah. State 
V. Johnson, 67 N. Car 55. Sofia and 
Sofira. Owen v. State, 7 Tex. App. 
329. See also Burgany v. State, 4 
Tex. App. 72. 

T. — Thompson and Thonpson. State 
V. Wheeler, 35 Vt. 261. Tougaw and 
Tugaw. Girous v. State, 29 Ind. 93. 
Tinmarsh and Tidmarsh. Homan v. 
Tidmarsh, II Moore 231. Trowbridge 
and Trobridge. Buhl v. Trowbridge, 42 
Mich. 44. 

U. — tfsrey and Userry. Gresham v. 
Walker, 10 Ala. 370. 

V. — Van Nortrick and Van Nort- 
wick. Mallory v. Riggs, 76 Iowa 748. 

W. — Wanzer and Wanser. Wanzer 
V. Barker, 4 How. (Miss.) 363. Wash 
Pans and Was Pans. Lynch v. Wil- 
son, 4 Blackf. (Ind.) 288. Whyneard 
and Winyard. Rex v. Foster, R. & 



124 



Doctrine of Idem Sonans. 



NAME. 



statement of the Bule. 



Ry. 412. Wilkinson and Wilkerson. 
Wilkerson v. State, 13 Mo. 91; s. c, 53 
Am. Dec. 137. WooUey and WoUey. 
Power V. WooUey, 21 Ark. 462. Whit- 
man and Whiteman. Henry v. State, 
7 Tex. App. 3S8. Wray'and Rae. 
Vance v. Wray, 3 Upp. Can. L. J. 69. 
William and Williams. Williams v. 
State, 5 Tex. App. 226. 

Z. — Zemeriah and Zimri. Ames v. 
Snider, 55 111. 498. 

Sutlnge. — In State v. Wilson, 40 La. 
An. 751, the verdict was, guilty of 
"assault by sutinge with intent to mur- 
der." It was held that the verdict was 
good, the word "sutinge" being reason- 
ably intended to mean "shooting," un- 
der the rule of idem sottans. 

Names Not Idem Sonans. — In the fol- 
lowing cases the names in conjunction 
have been held to be not within the 
rule: 

A. — Ammon and Amann. Amann 
V. People, 76 111. 188. Abie Burgamy 
and Avie Burgamy. Burgamj- v. State, 
4 Tex. App. 572. Able and Ebling. 
Weber v. Ebling, 2 Mo. App. 15. 

B. — Brimford and Binford. Entre- 
kin V. Chambers, 11 Kan. 377. Barnep 
and Barnap. Queen v. Carter, 6 Mod. 
168. Bart and Bartholomew. Curtis 
V. Marrs, 29 111. i;o8. Burrall and Bur- 
ril. Com. v. Gillespie, 7 S. & R. (Pa.) 
469. Burger and Buerger. Shumaker 
V. Schoen, 19 Pitts. L. J. (Pa.) 69. 
Behrensmeyer and Dehbenmeyer. 
Kreitz v. Behrensmeyer, 125 111. 141. 

C. — Catherine Swails and Ratherine 
Swails. Swails v. State, 7 Blackf. 
(Ind.) 324. Corayns and Cummins. 
Cruikshank v. Comyns, 24 111. 692. 
Cunnington v. Cunningham. Ex farte 
Cheatham, 6 Ark. 531; s. c, 44 Am. 
Dec. 525. Carter Gabriel and Gabriel 
Carter. Collins v. State, 43 Tex. 577. 

D. — Darius and Trius. Rex 7'. Davis, 
4 New Sess. Cas. 411; s. i;., 5 Cox C. C. 
237; 2 Den. C. C. 233. Dellia and 
Delia. Vance v. State, 65 Ind. 460. 

E. — Ebling and Able. Weber v. Eb- 
ling, 2 Mo. App. 11;. Elijah and Elisha. 
Craig V. Brown, Pet.C. Ct. (U. S.) 139. 
Eliere Lowtrheiser and Ezra Loutzen- 
heiser. Abbott v. State, 59 Ind. 70. 

F. — Fallock and Falk. Calkins v. 
Falk, I Abb. App. Dec. (N. Y.) 291; 
s. c, 39 Barb. (N. Y.) 620. Frank and 
Franks. Parchman v. State, 2 Tex. 
App. 228; s. c, 28 Am. Rep. 435. Fitz- 
patrick and Fitz Patrick. Moynahan 
V. People, 3 Colo. 367. 

G. — Grautis and Gerardus. Mann v. 
Carley, 4 Cow. (N. Y.) 148. Griffin 



and Griffith. Henderson v. Cargill, 31 
Miss. 367. 

H. — Hemessey and Hennessey. Com. 
V. Mehan, 11 Gray (Mass.) 321. Hair- 
holser and Hairholts. Mitchell v. 
State, 63 Ind. 276, 574. Henry M. 
Hawkins and Henry F. Hawkins. 
Dutton V. Simmons, 65 Me. 583; s. c, 
20 Am. Rep. 729. Henry and Harry. 
Garrison v. People, 21 111. 535. Hum- 
phreys and Humphrey. Humphrey v. 
Whitten, 17 Ala. 30. 

J. — Jonathan and John. Moore v. 
Graham, 58 Mich. 25. Jeflfery and Jef- 
fries. Marshall v. Jeffries, i Hempst. 
(U.S.) 299. Jacques and Jakes. Jacques 
V. Nichols, T. T. 586, Vict., Ont. Rep. 

E. — Kritler and Kladder. Brotherline 
V. Hammond, 69 Pa. St. 128. 

L. — Lindl}' and Lindsey. Selman v. 
Orr, 75 Tex. 528. Labarron and La- 
bern. ■ Lanesborough v. New Ashford, 
5 Pick. (Mass.) igo. Lyons and Lynes. 
Lynes v. State, 5 Port. (Ala.) 236; s. c, 
30 Am. Dec. 557. 

M. — Maley and Mealej'. Com. v. 
Donovan, 95 Mass. 57. McKlaskey or 
McKloskey, McCoskey and McKaskey. 
Black V. State, 57 Ind. 109. Mathews 
and Mather. Robson v. Thomas, 55 
Mo. 5S2. May and Marj'. Kennedy v. 
Merriam, 70 111. 228. McCann and Mc- 
Carn. Tannett's Case, Russ. & R. 351. 
Miller and Millen. Chamberlain v. 
Blodgett, 96 Mo. 482. Melvin and Mel- 
ville. State V. Curran, 18 Mo. 320. 
McDevro and McDero. McDevro v. 
State, 23 Tex. App. 429. Mincher and 
Minchen. Adams v. State, 67 Ala. 89. 
Munkers and Moncus. (If, by local us- 
age, the two names are given the same 
pronunciation, it was a question for the 
jury.) Munkers v. State, 87 Ala. 94. 

N. — Newton, New, Newt, Newtoand 
Newn; Newell, Nail, Null and Neden 
(names of candidates on ballots). New- 
ton V. Newell, 26 Minn. 529. 

0. — Otha and Oatha. Brown v. Peo- 
ple, 66 111. 344. Owen and Orrin. Ferry 
V. Matthews, T. T. 586, Vict. Ont. Rep. 

S. — Saunders and Launders. Jeune 
V. Jeune, 7 Mass. 94. Sedbetter and 
Ledbetter. Fellers v. State, 7 Ind. 659. 
Schoonhoven and Schoonhover. 
Schoonhoven v. Gott, 20 111. 46; s. c, 
71 Am. Dec. 247. Shurtliff and ShirtlifT. 
Gordon v. Austin, 4 T. R. 611. Shake- 
speare and Shakepeare. Shakespeare's 
Case, 10 East 83. Service and Servoss. 
Shinkell v. Letcher, 40 111. 48. Semon 
and Seaman. 7 Ark. 70. Sensenderfer 
and Sensenderf. Com. v. Bowers, 3 
Brewst. (Pa.) 350. Swift and Swist. 



125 



Doctrine of Idem Sonans. 



NAME. 



How Question Determined. 



it is sufficient in law to spell a name as it is regularly or commonly 
pronounced.^ 

2. How ftuestion Determined. — The question whether or not two 
or more names are idem sonans may, on a plea in abatement or 
special demurrer, be determined by the court upon a mere com- 
parison, where the issue is free from doubt, as if the words neces- 
sarily do or do not sound alike ; but the modern and approved 
practice is to submit the question to the jury whenever there is 
an opportunity to do so and where the correct sound appears 
at all doubtful or dependent upon particular circumstances.^ 



Jones ^'. Stenor, 3 Bulst. 121. Spintz 
and Sprinz. United States v. Spintz, 18 
Fed. Rep. 377. Smith and Weston and 
" Smith and Wesson. Morgan v. State, 
61 Ind. 447. E. Seymour and E. Ly- 
mour. Porter v. State, 17 Ind. 415. 

T. — Trius and Darius. Rex v. Davis, 
4 New Sess. Cas. 411; s. c, 5 Cox C. C. 
237. Tarbart and Tabart. Bingham v. 
Dickie, 5 Taunt. 814. Tarpley and 
Tapley. Tarpley v. State, 79 Ala. 271. 
Tragar and Troyer. Troyer v. Wood. 
96 Mo. 478. 

W. — Wood and Woods. Neiderluck 
V. State, 21 Tex. App. 320. Workman and 
Wortman. LaFayettei'. Workman, 107 
Ind. 404. Weston and Wesson. Mor- 
gan V. State, 61 Ind. 447. Wheeler and 
Wheelen. Whelen v. Weaver, 93 Mo. 
430. Wilkin and Wilkins. Brown v. 
State (Tex. 18S9), 11 S. W. Rep, 1022. 
Wilhelm and William. Becker ti. Ger- 
man M. F. Ins. Co., 68 111. 412. Willis- 
ton and Willison (Christian names). 
Bull V. Rranklin, 2 Speers (S. Car.) 46. 
Pat Whelan and P. Whelan or D. 
Whelan. Murray v. State, 6 Week. Jur. 

463- 

Emil)' J. Schweitzer will not be pre- 
sumed to be the same person as E. J. 
Schweitzer. Younti'. State, 64 Ind. 443. 

An indictment for assault gave the 
name of the person assaulted in differ- 
ent clauses, as McKaskey, McKlaskey 
and McKloskey, and the evidence 
showed that his name was McCoskey. 
Held, after conviction, that the indict- 
ment was insufficient. Black v. State, 
57 Ind. 109. 

1. Schooler v. Ashurst, 3 Marsh. 

(Ky.) 493- 

2. In Sayres v. State, 30 Ala. 15, 
Stone, J., referring to the issue oi idem 
sonans, said : "Generally such issue is 
triable by the court without evidence, 
and not by the jury. We will not say 
that there might not be cases in which 
it would be permissible to introduce 
evidence on the question. A foreign 



name might be in issue; and although 
the orthography of the supposed names 
might, according to the laws of our lan- 
guage, require us to affix to each a dif- 
ferent sound, yet, in fact, the foreign or- 
thography might be there sounded pre- 
cisely' as the letters employed by the 
American pleader would be here pro- 
nounced. Whether in such case the 
proper issue is idem sonans, or that the 
party is as well known by one name as 
the other, or if the former, whether the 
issue thereby becomes one for the jury, 
we do not now determine." 

In the English case of Rex v. 
Davis, 4 New Sess. Cas. 411; s. i.-., 5 
Cox C. C. 233, the rule of procedure is 
stated to be tliat: "If two names spelled 
differently necessarily sound alike, the 
court maj', as matter of law, pro- 
nounce them to be idem sonans; but if 
they do not necessarily sound alike, the 
question whether they are idem sonans 
is a question of fact for the jury." 
This rule has been recognized and ap- 
plied in Com. V. Donovan, 95 Mass. 57; 
Com. w. Jennings, 121 Mass. 47; Com. 
V. Warren, 143 Mass. 568; Weitzel i/. 
State, 28 Tex. App. 523; Underwood v. 
State, 72 Ala. 220. See also Whart. 
Crim. Ev. (8th ed.), § 96; i Bish. Crim. 
Proc. (3rd ed.) 792, note 3. 

In Taylor v. Com., 20 Gratt. (Va.) 
825, the court said that "the question is 
one for the jurv and not for the court, 
which cannot instruct the jury, as mat- 
ter of law, that any two names are or 
are not of the same sound." 

If a defendant submits to the court 
the question whether a name as proved 
is idem sonans with the name as alleged, 
and does not ask to have the question 
presented to the jury, and there is 
nothing of record to show how the 
names are pronounced, the appellate 
court will not interfere with the deter- 
mination of the trial court. Com. v. 
Gill, 14 Gray (Mass.) 400. 

Judicial Notice. — As a general rule, 



126 



Words of Identification. 



NAME. 



Names on Ballots. 



3. Names Beginning with Different Letter. — Though two names 
be commonly pronounced aHke, yet if the first letter of each is 
different, the rule of idem sonans cannot be invoked so as to bind 
third persons by constructive notice of public records indexed 
according to the different letter. Thus, although Yoest and Joest 
are pronounced alike in German, yet searchers for record encum- 
brances against " Yoest " are not bound to consult the indexes 
under the letter J.^ 

XXI. Words of iDENTincATiON. — Though the name of a party 
or third person be incorrectly given, yet the mistake may be 
sometimes cured by accompanying words of identification.^ 

XXII. Names on Ballots. — While there has not been an entire 
unanimity of decision upon questions as to the effect of errors 
occurring in the names of candidates for ofifice, as printed upon 
the tickets or written by the voters, it may be stated to be the pre- 
vailing tendency of courts and legislative bodies to disregard all 
such errors where, from the ballot itself and the circumstances 
surrounding the election, it can be ascertained with reasonable 
certainty that the name erroneously spelled was intended by the 
voter to designate the candidate whose name it resembles.^ The 



judicial notice will not be taken of the 
fact that two names are ordinarily pro- 
nounced so nearly alike as to be indis- 
tinguishable. Donnel x>. United States, 
I Morris (Iowa Ty.) 141; s. c, 39 Arn. 
Dec. 457. 

Instances. — Whether "Flory" and 
"Fleurer" are identical is a question for 
the jury. Imhoif v. Fleurer, 2 Phila. 
(Pa.) 35. So as to "Gigger" and "Jiger" 
or "Jigr." Com. v. Jennings, 121- Mass. 
47. So as to whether "Hennesse3'" 
and "Hemessey" are usuallj' sounded 
alike. Com. v. Mehan, ii Gray 
(Mass.) 321. So as to the name "Cel- 
estia" and ''Celeste." Com. v. Warren, 
143 Mass. 568. 

Where the name of the owner in an 
indictment for theft is alleged to be 
"Fraude" and is proven to be "Freude," 
the question of variance is for the jury, 
and it is error to rule as matter of law 
that the names are idem sonans. Weit- 
zel V. State, 28 Tex. App. 523. 

See also Underwood v. State, 72 Ala. 
220; Smurr -v. State, 88 Ind. 504; Sei- 
l?ert V. State, 95 Ind. 471. 

1. Heil and Lauer's Appeal, 40 Pa. 
St. 453. The searcher is not required 
to know how the name he is examining 
may be spelled according to the rules 
applicable to foreign languages. Bu- 
chan V. Sumner, 2 Barb. Ch. (N. Y.) 
197; s. c, 47 Am. Dec. 305. See also 
Johnson v. Hess (Ind. 1890), 25 N. E. 
:Rep. 44S. 



12? 



2. In Schee v. La Grange, 78 Iowa 
loi, it was held that a notice and 
petition designating the defendant as 
"Charles A. Luckenbough, assignee of 
Benjamin G. Unangst," sufficiently 
named such assignee, though his true 
name was Charles A. Luckenbach. So, 
where John C. Hopkins and wife were 
defendants, the wife's initials being T. 
P. B., and in the notice they were given 
as P. T. B., but she was further desig- 
nated as "the wife of John C. Hopkins," 
the court held that such descriptive 
words were sufficient to apprise her 
that she was the person intended. Fan- 
ning V. Krapfl, 68 Iowa 244; s. c, 26 N. 
W. Rep. 133. So, where an indictment 
charged the defendant with entering 
upon the land of S. Sicily Garrett, "wife 
of John H. Garrett" and the evidence 
showed that the owner's name was 
Sicily Garrett, and that she was the 
wife of the man named, the variance 
was held immaterial. Sewell v. State, 
82 Ala. 57. 

3. Thus, where ballots were cast at an 
election for Henry M. and also forjoseph 
M., and it was proved in a contest of 
election that Henry M. was the Demo- 
cratic nominee and another was the 
Republican nominee, and there were no 
other candidates for that office at that 
election and no person b}- the name of 
Joseph M. resided in the town or was 
known to the witnesses, residents of 
such town, and the name of Joseph M. 



Names in Legal 



NAME. 



FrooeedingB, Misnomer. 



rule of idem sonans is by all the courts applied to names on the 
ballots.i 

XXIII. Names IN Legal Peoceedings, Misnomer — 1. In General. — 

There are a number of rules governing the manner of stating the 
names of parties and third persons, which apply to both criminal 
and civil proceedings. Other principles belong distinctively to, or 
are more rigidly enforced in, criminal cases.* Both classes will be 
treated of in this connection. 

Although, as has already been stated, the courts will sometimes 
presume that a single letter, more especially a vowel, is itself a 
Christian name, the general rule is that it is not sufficient to des- 
ignate a party, either plaintiff or defendant, by the initial letter or 
letters of the Christian name. The full name must be given for 
purposes of identification.* 

But the designation of the parties by their initials and surnames 
only, or a misnomer, is not a ground of general demurrer. The 
remedy for such defects is by special demurrer or plea in abate- 
ment;* or, under the reformed procedure, by a motion to 
amend.^ 

Even the entire omission of the Christian name of a party is 
not a ground of general demurrer.® 

It has been held immaterial that the plaintiff's name does 



was printed on a number of Democratic Boon, i N. J. L. 138; Bliss Code PI., § 



ballots and voted by mistake, held, that 
the extraneous evidence admitted to 
show who was intended by Joseph M. 
was properly received, and that the bal- 
lots cast forjoseph M. counted for Henry 
M. McKennon v. Malzacher, no 111. 
305; s. c, 5 Am. & Eng. Corp. Cas. 
4.92. See title Elections, 6 Am. 
& Eng. Encyc. of Law 346, 347. See 
also Gumm v. Hubbard, 97 Mo. 311; 
Kreitz v. Behrensmeyer, 125 111. 141; 
State V. Williams, 95 Mo. 159. 

1. Newton v. Newell, 26 Minn. 529; 
Kreitz v. Behrensmeyer, 125 111. 141. 

2. See titles Indictment, 10 Am. 
& Eng. Encyc. of Law 483; Crimi- 
nal Procedure, 4 Am. & Eng. 
Encyc. of Law 769. See also Plead- 
ing; Practice. 

3. Turner v. Fitt, 3 M. G. & S. 701; 
Oakley v. Pegler (Neb. 1890), 46 N. W. 
Rep. 920; Knox v. Starks, 4 Minn. 20; 
Gardner v. McClure, 6 Minn. 250; 
Kenyon v. Semon (Minn. 1890), 45 N. 
W. Rep. 10; Wllthaus v. Ludecus, 5 
Rich. L. (S. Car.) 326; Norris v. 
Graves, 4 Strobh. (S. Car.) 32; Beggs v. 
Wellman, 82 Ala. 391; Labat v. Ellis, 
Taylor (N. Car.) 148; Chappell v. Proc- 
tor, Harp. (S. Car.) 49; Seeley v. 



146^. 

4. Turner v. Fitt, 3 M. G. & S. 701; 
Wilthaus V. Ludecus, 5 Rich. L. (S. 
Car.) 326; Woodbury v. Dye, 10 Rich. 
L. (S. Car.) 31; Seeley v. Boon, i N. J. 
L. 138; Peden xk King, 30 Ind. i8i; 
Handley v. Ludington, 3 W. Va. 53; 
Miller v. Hay, 3 Exch. 14; Rust v. 
Kennedy, 4 M. & W. 586; s. c, 7 Dowl. 
P. C. i99,3jur. 198. 

6. Kenyon v. Semon (Minn. 1890), 
45 N. W. Rep. 10; Hoffman v. Dicken- 
son, 31 W. Va. 142. 

Unless the objection that the initials 
only are given is raised by motion to 
require the full Christian name to be 
set out, it will be regarded as waived. 
Walgawood v. Randolph, 22 Neb. 493; 
Simonton v. Rohm (Colo. 1890), 23 
Pac. Rep. 86. And it has been held 
proper to dismiss a suit where the plain- 
tiff 's agent is unable to comply with an 
order to set out the plaintiff's full 
Christian name at or before the time 
issue IS joined. Fisher v, Northup, 79 
Mich. 287. 

6. Hahn v. Behrman, 73 Ind. 120; 
Hopper V. Lucas, 86 Ind. 43; Morn- 
ingstar v. Wiles, 96 Ind. 458. 

In Ohio it is held a fatal defect to in- 



128 



Names in Legal 



NAME. 



Proceedings, Misnomer. 



not appear in the caption, if it does in the body of the com- 
plaint. ^ 

As a general rule, misnomer can be taken advantage of only 
by timely objection in the nature of a plea in abatement.* 

A plea in abatement or similar objection for misnomer must 
disclose the defendant's true name.^ One defendant cannot ob- 
ject to a misnomer of his codefendant.* 

After a trial under the general issue, an appeal, and order for 
new trial, a plea in abatement for defects in names will not be 
entertained.* Nor can the objection be raised for the first time 
on appeal.® 

By pleading to the indictment, the defendant admits his name 
as laid therein, and is estopped to set up misnomer.'' And if he 
is indicted by a wrong name and when arraigned declines to give 
his true name, he cannot afterwards complain that he was tried by 
the wrong name.^ 

If a person customarily uses the initial letter only of his Chris- 
tian name, and is not known by any other name, he may be sued 
or indicted under such initial, and evidence of the use and repu- 
tation will be a sufficient answer to his plea of misnomer.^ But 
an indictment against a person by the initials only of his Chris- 
tian name is bad on a plea in abatement, unless it is alleged that 
his Christian name is to thegrandjury unknown except as set out. ^*' 



sert only the initials of the plaintiff's 
Christian name in the writ. Herf v. 
Shulze, 10 Ohio 263. 

1. Collins V. Lightle, 50 Ark. 97. 

2. Sunapee v. Eastman, 32 N. H. 470; 
State V. Farr, 12 Rich. (S. Car.) 24; 
First Nat. Bank v. Jaggers, 31 Md. 38; 
s. c, 100 Am. Dec. 53; Peden v. King, 
30 Ind. r8i; Melvin v. Clark, 45 Ala. 
285; Hudson V. Poindexter, 42 Miss. 
304; Salisbury v. Gillett, 3 111. 290; 
Moss V. Hint, 13 111. 1570; Pendleton v. 
Bank of Kentuckey, i'T. B. Mon. (Ky.) 
174; Hanly v. Blanton, i Mo. 49; 
Thompson v. Elliott,"* 5 Mo. 118; Ply- 
mouth Christian Soc. v. Macomber, 3 
Mete. (Mass.) 235; Smith v. Bowker, i 
Mass. 76; Jewett v. Burroughs, 15 Mass. 
469; Porter v. Cresson, 10 S. & R. (Pa.) 
257; Pate V. Bacon, 6 Munf. (Va.) 219; 
Mann v. Carley, 4 Cow. (N. Y.) 148; 
Waterbury v. Mather, 16 Wend. (N. 
Y.) 611; Barnes v. Perine, 9 Barb. 
(N. Y.) 202; Scull V. Briddle, 2 
Wash. (U. S.) 200; Baker v. Bessey, 
73 Me. 472; s. c, 40 Am. Rep. 377; 
Conaway v. ■ Hays, 7 Blackf. (Ind.) 

159- 

3. Louisville etc. R. Co. v. Hall, 12 
Bush (Ky.) 132; Union Bank v. Til- 
lard, 26 Md. 446; Bliss Code PI., § 
146a. 



i. Atkinson v. Clapp, i Wend. (N. 
Y.)7i. 

5. Lanier f. Cocke, 6 Munf. (Va.) 
580; Murdock f. Hurndon,4 Hen. & M. 
(Va.) 200. 

6. Traver v. Eighth Ave. R. Co., 4 
Abb. App. Dec. (N. Y.) 422; Dawson 
V. State, 33 Tex. 491. 

7. Mayo V. State, 7 Tex. App. 342; 
Musquez v. State, 41 Tex. 226. 

8. State V. Burns, 8 Nev. 251. 

9. City Council v. King, 4 McCord 
L. (S. Car.) 487; Diggs. v. State, 49 
Ala. 311; Vandermark v. People, 47 111. 
122; Singer Mfg. Co. v. Paul, 48 Ind. 
98; Rockwell V. State, 12 Ohio St. 427; 
Taylor v. Rossiter, 2 Miles (Pa.) 355; 
Jones's Estate, 27 Pa. St. 336. 

Business Name. — Where the defend- 
ant, whose name was Oscar R. Pegles, 
was in the habit of signing checks and 
doing business at banks and other 
places by the name of O. R. Pegles, 
those initials will be regarded as his 
business name, and a default judgment 
recovered against him by that name is 
not subject to collateral attack. Oakley 
V. Pegles (Neb. 1890), 46 N. W. Rep. 
920. See also Cummings v. Rice, 9 
Tex. 527. 

10. United States v Upham, 4^ Fed. 
Rep. 68. 



16 C. of L.— g 



129 



Karnes in Legal NAME, Froceedings, Uisnomer. 

To a plea of misnomer, it is a sufficient replication that the 
party is as well known by the name used in the process or plead- 
ing as by the one he alleges.^ 

If the name of the defendant or of a third person be correctly 
given in the charging part of the indictment, an error in a subse- 
quent unnecessary repetition of the name may be disregarded as 
surplusage.'' But it is not sufficient to give the defendant's name 
in the caption alone, omitting it entirely from the charging part.* 

The rule that the full Christian name and surname must be 
given in a pleading is not so strictly enforced in respect to pa- 
pers subsequently filed in the cause. As to these, any designation 
which clearly identifies the party is sufficient.* 

2. Initials of Third Persons. — The rule that initials cannot be 
used to designate an individual is not so strictly applied in cases 
of names of persons not parties to the proceeding. It is gener- 
ally held to be sufficient, in giving the names of third persons in 
indictments, or in civil actions, to designate them by the initials 
of their Christian names,* It has been held, however, that the 
full name of the owner of property alleged to have been stolen 
must be given in the indictment, if ascertainable.^ 

3. PartnersMp Names. — Where a partnership, a part of whose 
firm name is "Co.," " Bros.," or "Sons," sues, a declaration in the 
firm name, without setting out the names of all the partners, is 
bad on demurrer or motion to dismiss, the reason being that 
there are apparently parties plaintiff whose names are not given 
at all.' 

4. Changa of Name Pending Action. — It is no cause of abatement 
that the plaintiff has had his name changed during the pendency of 
the action; but it is proper to suggest such change upon the record.* 

1. Petrie v. Woodworth, 3 Cai. (N. v. Black, 31 Tex. 560; Mead v. State, 
Y.) 219; Goodenow f . Tappan, i Ham. 26 Ohio St. 505; State v. Seeley, 30 
(Ohio) 61; Frye v. Hinkley, 18 Me. Ark. 162; Ferguson v. Smith, lo Kan. 
320; Ta3'lor v. Rossiter, 2 Miles (Pa.) 396. 

355; Norris V. Graves, 4 Strobh. (S. 6. Willis v. People, i Scam. (111.) 

Car.) 32. 399. In this case, the property stolen 

2. Com. t;. Hunt, 4 Pick. (Mass.) 252; was alleged to be the property of "T. 
Greeson v. State, 5 How. (Miss.) 42; D. Hawke and E. Dobbins, doing busi- 
Rex V. Morris, i Leach 109. ness in the town of E., under the style 

3. Campbell w. State, 10 Ind. 420. and firm of T. D. Hawke & Co.," but 
In State v. Hand, 6 Ark. 165; s. c, 62 it was held that their Christian names 

Am. Dec. 689, the defendant was in- ought to have been given. 

dieted by the. name of "Hawkins , 7. Weisz v. Davey (Neb. 1890), 44 

late of," etc., and in a subsequent part N. W. Rep. 470; Hays v. Lanier, 3 
of the indictment it was alleged that Blackf. (Ind.) 322; Hughes w. Walker, 4 
"he, the said Hawkins Hand, did," etc. Blackf. (Ind.) 51; Barrackmant'.Worth- 
The defendant pleaded, in abatement, ington, 5 Blackf. (Ind.) 213; Tanners, 
that his name was not Hawkins, but was Swearengen, 6 Blackf (Ind.) 277; Bent- 
Hawkins Hand, and the plea was held ley v. Smith, 3 Cai. (N. Y.) 169; Bru- 
good, notwithstanding the fact that the baker v. Poage, i T. B. Mon.'(Ky.) 123; 
correct name was to be found in the in- Revis v. Lamme, 3 Mo. 207. See also 
dictment. Partnership. 

4. Gordon v. State, 59 Ind. 75. 8. Town of Ottawa v. La Salle Co., 
B. State V. Brite, 73 N. Car. 26; State 11 III. 654. 

130 



Names in Legal NAME. Proceedings, Misnomer. 

5. Name Unknown. — In criminal cases, in warrants as well as in 
indictments, if the name of the accused or of a tliird person is not 
known, and cannot by due diligence be ascertained, it is sufficient 
to state that the name is not known ; and the accused may be 
proceeded against under any fictitious name, the right one to be 
inserted when discovered.^ It is not, however, necessary in such 
cases to give a fictitious name ; the name maybe entirely omitted, 
and the identity shown by words of description.^ 

It is not to be implied from circumstances, as shown by the in- 
dictment, that the names of third persons who are referred to 
therein, but whose names are not given, are unknown. There 
must be a positive averment to that effect.** The allegation that 
the true name is unknown need not be proven beyond a reason- 
able doubt.* 

6. Alias Dictus. — When a person is known by two or more dif- 
ferent names, and it is uncertain which one is his true name, he may 
be sued or indicted under any one of them, with an averment that 
he is also, or otherwise known by the other name — the common 
practice being to give the two names thus : " Smith alias Brown."* 
The omission of the word dictus after the word alias does not 
render the pleading uncertain or bad.® Christian names may be 
set out in the same way,' though the contrary was formerly held 
in England.^ And so may the names of third persons.® In all 
cases it is sufficient to prove that the person in question is known 
by either one of the names given. ^'^ 

It is a plain proposition that when a person executes a con- 
tract or deed in a name differing in any respect from his true 
name, he will not be allowed, on that account alone, to deny that 

See also Pennsylvania Co. v. Sloan, indicted for assaulting "one Rice, whose 

125 111. 72. Christian name is to the grand jurors 

1. See also Indictment, 10 Am. & aforesaid unknown." But in State v. 
Eng. Encyc. of Law, 483-4S5; Crimi- Geiger, 5 Iowa 484, an indictment de- 
NAL Procedure, 4 Am. & Eng. Encyc. scribing the defendant as "a man in 
of Law 769, 770, 7S0. Turner Hall, whose name to the grand 

Rutherford ». State, 13 Tex. App. 92; jurors is unknown," was held fatally 

Bryant v. State, 36 Ala. 270; Cameron indefinite. 

V. State, 13 Ark. 712; State v. O'Don- 3. State v. O'Donald. i McCord L. 

aid, I McCord L. (S. Car.) 532; State (S. Car.) 532. 

V. Burns, 8 Nev. 251; People v. Jim Ti, 4. Guthrie v. State, i6 Neb. 667. 

32 Cal. 64; State v. White, 32 Iowa 19. 5. Anonymous, 3 Salk. 238; Kennedy 

2. Harris f. State, 2 Tex. App. 102. v. People, 39 N. Y. 245; Reid v. Lord, 
Omission of Name. — In State Tt. Jack- 4 Johns. (N.Y.)iiS; Harrison t;. State, 

son, 4 Blackf. (Ind.) 49, the deceased 6 Tex. App. 256; Williams v. State, 13 

was described as "an Indian of this Tex. App. 285; Rutherford f. State, 13 

State, of the Miami nation of Indians, Tex. App. 92; U. S. v. Wright, 16 Fed. 

the name of which said Indian to the Rep. 112; Haley v. State, 63 Ala. 89. 
jurorsaforesaidis wholly unknown," and 6. Kennedy w. People, 39 N. Y. 245. 
it was held sufficient. So in Reed v. 7. Lee v. State, 55 Ala. 259. 
State, 16 Ark. 499, where the deceased 8. Rex v. Newman, i Ld. Raym. 

was described as "a certain Wyandotte 562. 

Indian, whose name is unknown to the 9. Kennedj- v. People, 39 N. Y. 245. 
grand jury." So in Cameron v. State, 10. Williams v. State, 13 Tex. App. 

13 Ark. 712, where the defendant was 2S5; Evans v. State, 62 Ala. 6. 

131 



Names in Legal 



NAME. 



Proceedings, Misnomer, 



it is his contract or deed.^ An action thereon against him should 
be brought in his true name, and the manner of executing it 
shown by an alias dictus?' 

One to whom an instrument is made payable by a name dif- 
fering from his true name, should properly sue thereon in his true 
name, and aver that the instrument was executed to him by the 
wrong name, giving it.* 

7. Names in Judgments.* — The entry of a judgment against "the 
defendants," or in favor of " the plaintiffs," is good, even though 
the names of the parties are not specified in the judgment. Their 
names are to be ascertained by the process, pleadings and pro- 
ceedings in the action.^ So a judgment for plaintiffs in their 
partnership name only is good where their individual names are 
given in the pleadings.® So is a judgment against a partnership, 
though their firm name is transposed.' But if the party in whose 
favor or against whom the judgment is rendered is not named 
therein, and is not referred to so as to be ascertainable from 
the pleadings, the judgment is a mere nullity.® 

A judgment is not void where there were real parties in inter- 
est in the action, a real controversy and a real decision, though 
it was prosecuted by the real plaintiff under a fictitious name.^ 
Material errors in the defendant's name, and variances therein be- 
tween the pleadings and the judgment, are often sufficient to 
vitiate the judgment.^® 



1. Fallon V. Kehoe, 38 Cal. 44; s. c, 
99 Am. Dec. 347; O'Meara v. North 
American Min. Co., 2 Nev. 112; Booth- 
royd V. Engles, 23 Mich. 19. 

Martindale, Conveyancing, 64; Com. 
Dig. tit. Fail, B. i. 

2. Wilson %>. Shannon, 6 Ark. 196; 
Lowell V. Morse, i Mete. (Mass.) 473; 
Blood V. Crandall, 28 Vt. 396. 

3. Nicholay t). Kay, 6 Ark. 59; s. c, 42 
Am. Dec. 680; Jester t;. Hopper, 13 Ark. 
43; Lowell V. Morse, 1 Mete. (Mass.) 
473; Commercial Bank v. French, 21 
Pick. (Mass.) 486; Med way Cotton 
Manufactory v. Adams, 10 Mass 360; 
Board of Education v. Greenbaum, 39 
III. 609; Pinckard v. Wilmine, 76 111. 
453; Taylor v. Strickland, 37 Ala. 642; 
Wood V. Coman, 56 Ala. 283; Leap- 
hardt v. Sloan, 5 Blackf (Ind.) 278; 
Patterson v. Graves, 5 Blackf. (Ind.) 
593; Robb V. Bailey, 13 La. An. 457. 

4. See also title Judgments, 12 Am. 
& Eng. Encyc. of Law 76, 106. 

5. Finnegan v. Manchester, 12 Iowa 
521; Boyd V. Baynham, 5 Humph. 
(Tenn.) 386; s. c, 42 Am. Dec. 438; 
Wilson V. Nance, 11 Humph. (Tenn.) 
189; Marshall v. Hill, 8 Yerg. (Tenn.) 
loii Thomas 7'. Sterns, 33 Ala. 137; 
Collins V. Hyslop, 11 Ala. 50S; Little 



■V. Birdwell, 27 Tex. 688; Hays v. Yar- 
borough, 21 Tex.4S7; Claggett v. 
Blanchard, 8 Dana (Ky.) 41. 

6. Brooks v. Ratcliff, 11 Ired. L. (N. 
Car.) 321; Cohoon v. Morton, 4 Jones 
L. (N. C.) 256; McNamee f. Huffman, 

3 Har. rDel.) 425; Marshall v. Hill, 8 
Yerg. (Tenn.) loi; Condry v. Henley, 

4 Stew. & P. (Ala.) 9; Davis v. Kline, 
76 Mo. 310. 

7. Loyd V. Hicks, 31 Ga. 140. 

In Pennsylvania, judgments against 
partnerships, without setting out the 
names of the members, are not liens as 
respects subsequent purchasers and en- 
cumbrancers, without actual notice. 
York Bank's Appeal, 36 Pa. St. 458; 
Smith's Appeal, 47 Pa. St. 12S; Ste- 
phens' Appeal, 38 Pa. St. 9. 

8. A decree entered in favor of the 
"legatees of Phillip Joseph," without 
giving the names of such legatees, can- 
not be enforced by execution, nor can a 
writ of error be maintained against the 
legatees by that name. Joseph t;. Joseph, 

5 Ala. 280. See also Turner v. Dupree, 
19 Ala. 198. 

9. McNair z<. Taber, 21 Minn. 175. 

10. Seealso title Judgments, 12 Am. 

6 Eng. Encyc. of Law 76, 106. 
Wrong Name. — A judgment is of no 



132 



Names in Legal 



NAME. 



Proceedings, Hisnomer. 



Whether the docket entry of a judgment affords constructive no- 
tice of its existence to subsequent encumbrancers or purchasers 
from the judgment debtor, depends upon the accuracy with which 
the name is given in the record. Instances where this question 
has been considered are given in the note.^ 

8. Statute of Additions. — By the EngHsh statute, i Hen. V, ch. 5, 
known as the statute of additions, indictments in certain cases 
were required to describe the defendants by addingto their names 
their '' estate, degree or mystery, and place of residence." This 
statute has been held to be in force in some of the States of the 



force against a party who made no ap- 
pearance, and whose name is different 
from the name given in all the proceed- 
ings to designate the defendant, though 
process in the action was served upon 
him and judgment was rendered against 
him in his true name. Moulton v. De 
MaCarty, 6 Robt. (N. Y.) 470. 

Christiau Name. — Where a writ and 
declaration were against " David " and 
the verdict and judgment against "Dan- 
iel," the variance was held to vitiate the 
judgment. Sweazy v. Nettles, 2 Mo. 6. 

Where a person was sued by the 
Christian name of James, service was 
returned on John, and judgment entered 
against J., the judgment was held bad 
unless there was something of record to 
show that the person served was the 
defendant. Sutter tk Cox, 6 Cal. 415. 

In an action against '"Frederick D. 
Conrad," a judgment against "Daniel 
Frederick Conrad, the defendant," is 
good. Conrad v. Griffey, n How. (U. 
S.) 480. 

1. Junior. — A judgment against M. 
C, Jr., under the nameof M.C., becomes 
a lien upon the land of M. C, Jr., and is 
constructive notice to all persons, 
though there is another M. C, the de- 
fendant's father, residing in the same 
county. Bidwell v. Coleman, 11 Minn. 
78. 

Middle Name. — The record of a judg- 
ment against William Mankedickis not 
constructive notice to purchasers in 
good faith from H. W. Mankedick, 
who had never heard him called by the 
name of William. Johnson v. Hess 
(Ind. 1890), 25 N. E. Rep 445. 

Middle Initial. — It is the successful 
party's duty to see that the judgment is 
correctly entered, and if the omission 
of the judgment debtor's middle initial, 
which alone distinguishes him from 
others of the same name, deceives the 
purchaser of the defendant's real prop- 
erty, the judgment cannot be enforced 
against such purchaser. Wood v. 



133 



Reynolds, 7 W. & S. (Pa.) 406; Hutch- 
inson's Appeal, 92 Pa. St. 186. 

But unless it be made to appear that 
purchasers have been misled thereby, 
the omission of the defendant's middle 
initial does not aftect the lien of the 
judgment. Clute v. Emmerich, 26 
Hun (N. Y.) 10; Hopper v. Lucas, 86 
Ind. 43 

In Pennsylvania the rule is well 
settled that the wrongful introduction 
or omission of a middle name or letter 
will postpone the judgment to one sub- 
sequently properly entered. Scott, v. 
Irwin, 2 Chest. Co. Rep. (Pa.) 137; 
Wood V. Reynolds, 7 W. & S. (Pa.) 
406; Jones's Estate, 27 Pa. St. 336. See 
also Perkins v. Nichols, i Del. Co. 
Rep. (Pa.) 519. 

]3ut it seerps that knowledge of the 
facts by the subsequent lienholder 
will cause his postponement. King v. 
King, 2 Chester Co. Rep. (Pa.) 45. 

In Geller v. Hoyt, 7 How. Pr. (N. Y.) 
265, an error in the docket entry of the 
initial letter of the judgment debtor's 
middle name was corrected and the 
judgment declared a lien from the date 
of the original docketing. 

Idem Sonans. — The index of a judg- 
ment against William Burger is not 
constructive notice of a judgment 
against William Buergee. Schumaker 
V. Schoen, 19 Pitts. L.J. (Pa.) 69. 

Docketing Under Wrong Letter. — 
Docketing a judgment under the letter 
P, the initial of the judgment debtor's 
Christian name, and not under the let- 
ter S, the initial of his surname, is no 
compliance with the New York statute 
prescribing the docketing of judgments 
in an "alphabetical docket." Buchan v. 
Sumner, 2 Barb. Ch. (N. Y.) 165; ». 
c, 47 Am. Dec. 385. 

Omitting Clirlstlan Name. — A judg- 
ment docketed against "Mitchell, 
Green . . . Wilson," omitting their 
Christian names, is not preferred to 
subsequent encumbrances. The judg- 



Names in Legal 



NAME. 



Proceedings, Uisnomer. 



Union, ^ but in others it is regarded as inapplicable, or has been 
changed by statutory provisions. ** 

9. EflFect of Sustaining Plea; Amendment. — At common law in 
criminal cases, the indictment abated if the plea of misnomer was 
sustained ;^ but the more modern practice, particularly under the 
prevailing statutes of amendment, is to have the true name in- 
serted when ascertained, and the trial to proceed under the indict- 
ment as amended.* 

In civil proceedings nothing is gained by sustaining the plea, 
except to have the correct name inserted in the record.^ 

If the defendant has been sued under a wrong name, and the 
right one is disclosed by the answer, he cannot object to an 
amendment of the complaint accordingly, even after the evidence 
is in ;^ or after judgment.'^ 



ment creditor was bound to see his 
judgment properly entered, so as not to 
deceive other creditors or purchasers, 
or put them to unnecessary trouble or 
risk. Ridgwa3''s Appeal, 15 Pa. St. 181. 

1. In Alabama, Morgan v. State, 19 
Ala. 556. 

In Maryla}id, State v. Hughes, 2 
Har. & M. (Md.) 479. 

Maine. — State v. Bishop, 15 Me. 
122; State V. Nelson, 29 Me. 329. 

Massachusetts. — Com. v. Lewis, i 
Mete. (Mass.) 151. 

Pennsylvania. — Com. v. France, 2 
Brewst. (Pa.) 56S. 

Virginia. — Com. v. Sims, 2 Va. Cas. 

374- 

Georgia. — Studstil v. State, 7 Ga. 2. 

Kentucky. — Cora. v. Rucker, 14 B. 
Mon. (Ky.) 1S4. 

New Hampshire. — State v. Moore, 
14 N. H.4SI. 

North Carolina. — State v. New- 
mans, 2 Car. L. Repos. (N. Car.) 74. 

2. In Rhode Island the requirement 
has been abolished by statute, yet to 
give in an indictment a false addition 
or degree has been held to be fatal, as 
■where a feme covert was indicted as 
"Spinster." State v. Daly, 14 R. I. 
510. So it has been held in England 
that to describe a woman as "widow" 
■when she is known to be married, is a 
fatal variance, though no description 
■was necessary. Rex v. Deeley, i 
Wood. C. C. 303; s. c, 4 C. & P. 579. 

In Indiana, the statute of additions 
is considered inapplicable. State v. 
McDowell, 6 Blackf. (Ind.) 49, in which 
Dewey, J., said: "The objection 
urged against the indictment is that the 
defendant is not described by the addi- 
tion of his degree, or mystery, and 
place of residence. By the common 



law no addition was required in indict- 
ments against persons under the degree 
of a Knight, i Chit. C. L. 204. The 
statute of additions, i Hen. V, ch. 5, 
enacts that defendants shall be de- 
scribed by adding to their names their 
estate, degree or mystery, and place of 
residence, in all cases in which 'the exi- 
gent shall be awarded.' . . . The exi- 
gent, being a step in the proceedings of 
outlawry, is unknown to our law. It is 
therefore, evident that the statute of 
additions, from its own terms, is not 
applicable to prosecutions in this State; 
and it is equally clear that the common 
law does not require the defendant to 
be described by his addition." 

3. I Bac. Abr. 10; State v. Mic^dle- 
ton, 5 Port. (Ala.) 484; Findley r;. Peo- 
ple, I Mich. 234; Rawls v. State, 8 
Smed. & M. (Miss.) 599. 

4. See State v. Jackson, 4 Blatchf. 
(Ind.) 49; ante, XXIII, § 5, note 2, 

6. I Chit. PI. 246; Murray- v. Hub- 
bard, I B. & P. 645; Dickinson v. Bow- 
ers, 16 East no; Rogers v. Boehm, 2 
Esp. 702; Reeves v. Slater, 7 Barn. & 
C. 487; Waterbury v. Mather, 16 
Wend. (N. Y.) 611." 

6. Ramsey v. Cortland Cattle Co., 6 
Mont. 498; Oakley v. Pegles (Neb. 
1890), 46 N. W. Rep. 920. 

7. McDonald v. Swett, 76 Cal. 257. 
In Anderson v. Horn, 23 Abb. N. 

Cas. (N. Y.) 475, where defendant was 
sued by the name of John Horn, but in 
his answer he described himself as John 
A. Horan, the court, on an application 
to vacate the judgment, ordered the 
parties to appear for oral examination 
in order to ascertain the defendant's 
true name or his alias dictus, so as to 
decide whether or not he had been cor- 
rectly proceeded against. 



134 



Names of CarporationB. 



NAME. 



In General. 



Where the plaintiff has made a mistake in his own name in the 
complaint, the court may permit him to amend. ^ But in Mary- 
land it has been held that, under the code, where an attorney 
mistakes the name of his client in the declaration, he cannot have 
the error amended. ** 

It has been held that a company may acquire a name other 
than its original corporate name as a trade mark, and that another 
company will be enjoined from using it.' 

XXIV. Names of Coepoeations* — 1. In General. — Corporations 
should, of course, sue or be sued by their corporate names, and 
not bv the individual names of their members." And when an 



1. Weaver v. Young, 37 Kan. 70; 
Woodson V. Law, 7 Ga. 105 (where 
the plaintiff was permitted to change 
his name from William to James). 

But in Bingham v. Dickie, 5 Taunt. 
814, the court refused to allow an 
amendment of a clerical error in the 
spelling of the plaintiff's name in a bail 
piece, unless the sureties thereon would 
consent. 

2 Thanhauser v. Savins, 44 Md. 
410. 

3. Goodyear Rubber Co. v. Good- 
year Rubber Mfg. Co., 8 Am. & Eng. 
Corp. Cas. 317. See also Trade 
Mark. Drummond f. Tobacco Co., 
10 Am. & Eng. Corp. Cas. 9. 

4. See Corporations, 4 Am. & 
Eng. Encyc. of Law 203, 206; 188 note 
5; Foreign Corporations, 8 Am. & 
Eng. Encyc. of Law 329. 

B. Illinois State Hospital etc. v. 
Higgins, 15 111. 185; Campbell v. 
Brunk, 25 111. 210; Town of Fort 
Wayne v. Jackson, 7 Blackf. (Ind.) 36. 

"Where corporate rights and inter- 
ests are affected in any way wrongfully 
and injuriously, those rights and inter- 
ests, generally speaking.and unless some 
special ground be shown, must be as- 
serted and defended, both at law and in 
equity', in the corporate name." Brad- 
ley 1'. Richardson, 2 Blatchf. (U. S.) 

343- 

"A court in a declaration in debt 
commenced as follows: A. P. Ha^' and 
others (naming them), being a body cor- 
porate and politic, known by the name 
of the Board of Trustees of the Clark 
County Seminary, and being the regu- 
lar successors in office of Jno. C. Parker 
and others (naming them), were sum- 
moned to answer, etc. It then stated 
that the last named persons, Parker 
and others, being the board of trustees, 
etc.. b^' an agreement, sealed with the 
seals of the trustees last mentioned. 



135 



promised, etc., that neither they nor the 
defendants, being their successors, had 
paid, etc. Held, that this count was in- 
sufficient; that the addition to the de- 
fendants' names of the words 'being a 
body corporate, etc.,' was a mere de- 
scriftio fers narum; that the defend- 
ants must be considered, under this 
count, as»being sued in their individual 
capacities, on a contract to which they 
were not parties, and by which they 
were not bound; and also that if, as the 
plaintiff contended, the agreement sued 
on was binding on the board of trustees 
of the Clark County Seminary as a cor- 
poration, the suit should have been 
brought against the corporation by its 
corporate name." Ha3' v. McCoy, 6 
Blackf. (Ind.) 69. 

Where one subscribed for certain 
shares in a turnpike, and promised to 
pay to A B, agent of the proprietors, 
all assessments, etc., it was held that 
the agent could maintain no action for 
the assessments unpaid, but that the 
promise would support an action by the 
proprietors in their corporate capacity. 
Gilmore v. Pope, 5 Mass. 491. 

In Commercial Bank v. French, 21 
Pick. (Mass.) 486, the court held that 
where a promissory note was made 
payable "to the cashier of the Com- 
mercial Bank or his order," and the 
consideration proceeded from the bank, 
an action on the note might be main- 
tained in the name of the bank as the 
promisee. Morton, J., observes: "Had 
the note been made to the cashier by 
name, the addition of 'cashier of the 
Commercial Bank' might have been 
considered as descriptio personce, used 
to designate, as between him and the 
bank, the relation he bore to it in the 
transaction, and the individual might 
have been deemed the promisee. But 
such was not the fact." . See 

also Medway Cotton Manufactory _v. 



Names of Corporations. 



NAME. 



In General. 



offence is charged in reference to the property or rights of a pri- 
vate corporation, its corporate capacity should be alleged,-' and its 
corporate name should be stated with substantial accuracy;* but 
a slight variation in the name, such as would not raise a doubt of 
the identity of the corporation, will be regarded as immaterial.* 



Adams, lo Mass. 360, where it was de- 
cided that a note payable to Richard- 
son, Metcalf & Co., might be declared 
on as a promise to The Medway Cotton 
Manufactory. 

In Taunton etc. Turilpike v. Whiting, 
10 Mass. 327; s. c, 6 Am. Dec. 124, it 
was held that the promise, in a subcrip- 
tion paper, to pay the assessments 
which should be made on certain shares 
to John -Gilmore or order, would sup- 
port an action in the name of the cor- 
poration. 

And in Gilmore v. Pope, 5 Mass. 491, 
it was decided that an action would 
not lie upon the same subscription in 
the name of Gilmore, but must be 
brought by the corporation. See also 
Tucker v. Seaman's Aid Soc, 7 Mete. 
(Mass.) 188, 209. 

See, however, Fisher v. Ellis, 3 Pick. 
(Mass.) 322, where the court held that 
a note payable to the treasurer of a 
parish might well be sued in the name 
of the treasurer. (But this case does 
not show that an action might not 
have been maintained in the name of 
the corporation.) 

And in Fairfield v. Adams, 16 Pick. 
(Mass.) 381, it was decided that a note 
endorsed to S. S. Fairfield, cashier, 
would sustain an action in the name of 
Fairfield. See also Little v. O'Brien, 9 
Mass. 423; Brigham v. Marean, 7 Pick. 
(Mass.) 40. 

A banking association . . . brought 
an action, describing itself as "the 
Washington County National Bank, a 
corporation duly established by law 
and doing business in Greenwich in the 
State of New York;" and, to prove its 
corporate existence, introduced an or- 
ganization certificate of "The Washing- 
ton County National Bank of Green 
wich" to be located ... in the 
town of Greenwich, county of Wash- 
ington and State of New York," and a 
certificate of the comptroller of the cur- 
rency that "The Washington County 
National Bank of Greenwich, in the 
county ofWashington and State of New 
York" had been duly organized. Held, 
that in the absence of evidence of the 
existence at Greenwich of another bank 
named "the Washington County Na- 



tional Bank of Greenwich," the evi- 
dence would warrant the inference of 
the plaintiff's due organization. Wash- 
ington County National Bank v. Lee, 
112 Mass. 521. See also GiflFord v. 
Rochett, 121 Mass. 431. 

1. People V. Schwartz, 32 Cal. 160; 
Cohen v. People, 5 Park. Cr. (N. Y.) 
330; Wallace v. People, 63 111. 452; 
State V. Mead, 27 Vt. 722; Emmonds v. 
State, 87 Ala. 12; Johnson v. State, 73 
Ala. 483; 2 Russ. Crimes, 100; Whart. 
Crim. PI., § no, note I. 

In Emmonds v. State, 87 Ala. 12, an 
indictment was held bad which charged 
a breaking and entering of the store of 
the "Perry Mason Shoe Company," 
without alleging such company to be 
either a corporation or a copartnership. 
If it had been a copartnership, there was 
nothing to show that the defendant was 
not one of the partners, in which case 
he could not have been guilty of the 
offence of breaking and entering into 
the firm's premises. 

But see Fisher v. State, 40 N. J. L. 
169, where an indictment for burglary 
with intent to steal, alleging that the 
building and goods were the prop- 
ert3' of the O. Iron Compan,y, was 
held sufficient without an allegation 
that the company was duly incorpp- 
rated. See also Norton v. State, 74 
Ind. 337, where it was held unnecessary 
to allege the corporate existence of a 
certain railroad company upon whose 
premises the offence was alleged to 
have been committed, because it would 
be presumed to be a corporation. 

2. In an indictment for wilfully ob- 
structing a railroad alleged to have 
been built by the B. and W. Railroad 
Compan}', it is a fatal variance if the 
true name is the B. and W. Railroad 
corporation. Cora. v. Pope, 12 Cush. 
(Mass.) 272. But the use of "railroad" 
for "railway'' was held unimportant in 
State V. Brin, 30 Minn, 522. See also 
Propst V. Georgia Pac. R. Co., 83 Ala. 
S18. 

3. In Thatcher v. West River Nat. 
Bank, 19 Mich. 198, by the declaration, 
the plaintiff claimed to be a corporation 
b3' the name of "The West River Na- 
tional Bank of Jamaica, Vermont," and 



136 



Names of Corporations 



NAME. 



In General. 



Where a corporation sues or is sued by a wrong name, the 
proper practice is to take advantage of the misnomer by a pjea in 
abatement.^ 

Change of Name — How Change Is Effected.— K corporation can- 
not of itself, like a partnership or simple stock company, effect a 
change of name. Such a change can only be wrought by the 
power that created the corporation.* In many of the States, 



the certificates did not tend to show 
the existence of a corporation by this 
name, but only of one by the corporate 
name of "The West River National 
Bank of Jamaica." The variance was 
held to be immaterial. 

Where the name of a corporation 
consists of several words, the transpo- 
sition, omission or alteration of some of 
them may not be regarded as impor- 
tant, if it is evident what corporation is 
intended. Chadsej' v. McCreery, 27 
111. 252. See also Mott v. Hicks, i 
Cow. (N. Y.) 513; s. c, 13 Am. Dec. 
550; People V. Love, 19 Cal. 677. 

Employers Liability Companies. — 
Plaintiff, an English corporation doing 
business in New York under the cor- 
porate name of "Employers" Liability 
Assurance Corporation," sought to en- 
join the defendant, a New Jersey 
corporation named the "Employ- 
ers' Liability Insurance Company of 
the United States," and doing business 
in New York, from using the words 
"Employers Liability" as part of its 
corporate name. Plaintiff contended 
that such use by defendant would cause 
confusion as to the identity' of the two 
companies, in view of the custom of re- 
ferring to insurance companies by ab- 
breviated titles. The evidence showed 
the existence of several other insur- 
ance companies engaged in the same 
kind of business, and that they all used 
the words "Employers Liability" in 
their corporate names. Held, that 
although plaintiff was the first to adopt 
and use the words, they must be con- 
sidered as designating a particular kind 
of insurance business, rather than as 
expressing proprietorship, and that de- 
fendant had a right to use them. Also 
that, as defendant would have no rightto 
do business except in its full corporate 
name, which is clearly distinguishable 
from plaintiff's, the "objection based 
on the custom of abbreviating was not 
available. Employers Liability Assur- 
ance Corp. V. Employers Liability Ins. 
Co., 10 N. Y. Supp. S45. 

1. Burnham v. Savings Bank, 5 N. 



H. 446; Mellor v. Spateman. t Saun- 
ders Rep. 340; Lewiston v. Proctor, 27 
111. 416; Marsh v. Astoria Lodge, 27 
111. 4; Hoereth v. Franklin Mill Co., 
30 111. 157; Northumberland Co. Bank 
V. Ever, 60 Pa. St. 436. And cases cited 
where distinction is drawn between 
plea in abatement and plea in bar, 
as regards misnomer of corporations. 

If a corporation, being sued by a 
wrong name, plead to the action by its 
true name, the misnomer is no cause 
for arresting the judgment; for it should 
have been pleaded in abatement. Gil- 
bert V. Nantucket Bank, 5 Mass. 97. 
See also Com. v. Dedham, 16 Mass. 
141. 

Court will not take judicial notice of 
a statement in a report of the commis- 
sioner of railroads to the effect that the 
terms of a statute authorizing a change 
of name on the part of a railroad com- 
pany have been complied with, and the 
name of the company changed. Cin- 
cinnati etc. R. Co. V. Hoffhines, 46 
Ohio St. 643; 40 Am. & Eng. R. Cas. 
221. 

Where a fraternal beneficiary associ- 
ation organized under the Massachu- 
setts statute sought an injunction 
against the use of a similar name by 
another organization, it was held that 
as the statute made the certificate of 
the insurance commissioner and secre- 
tary of the commonwealth conclusive, 
the interposition of the court was not 
required. American Order of Scottish 
Clans W.Merrill (Mass. 1S90), 24 N. E. 
Rep. 918. 

2. Waterman on Corp., vol. i,p. 119; 
Boone on Corp., §31; Ang. & Ames on 
Corp., § 102; McGary v. People, 45 N. 
Y. 153; Regina v. Registrar, L. R., 10 
Q^B. 844; s c, 59 E. C. L. 843; Shack- 
elford V. Dangerfield, L. R., 3 C. P. 407; 
Morris v. St. Paul etc. R. Co., 19 Minn. 
528; Dubuque & Minn. R. Co. v. Keisel, 
43, Iowa 39. 

The identity of name is the principal 
means for effecting the perpetuity of 
succession, which is an important pur- 
pose of incorporation. The title to 



1.37 



Names of Corporations. 



NAME. 



In General. 



however, the legislature has empowered the courts, upon applica- 
tion, to change the names of corporations.^ 

Effect Thereof. — A mere change or abbreviation of the name of 
a corporation does not change or affect its corporate identity, nor 
will such change affect the right of a corporation to sue upon a 
note made payable to it under its former name ; nor to accept the 
benefits of a grant made to it under such name; nor in any other 
way affect its rights or liabilities.^ And where a corporation has 



shares, the liability on contracts, and 
the right to assets, would be in danger 
of confusion if the name were subject to 
such change. Regina v. Registrar, lo 
Adol. & Ell. 839. See also Hazelett v. 
Buttes University, 84 Ind. 232. 

1. Corporations of this State (N. Y.), 
if organized under general laws (ex- 
cept banks, banking associations, trust 
companies, life, health, accident, marine, 
and fire insurance companies, railroad 
companies), may appl3' to supreme 
court, general term, in the judicial dis- 
trict in which is situated the principal 
corporate property' of such corporation, 
or its chief business office, to have name 
changed, i L., 1S70, p. 750, ch. 322, § i. 

In Tennessee, courts of chancer^' are 
clothed by statute with authority to 
change the name of any private cor- 
poration upon application and good 
reason shown by the directors. Act of 
Tenn. of 1871, ^11. In Maitie, a cor- 
poration may, at a legal meeting of 
stockholders, vote to change its name 
and adopt a new one; and when the 
proceedings of such meeting, certified 
by its clerk, are returned to the office 
of the secretary of state, to be re- 
corded by him, tlie name will be deemed 
changed. Rev. Stats, of Me. (ed. of 
187 1 ), p. 394, §5. See Trustees of North- 
western College V. Schwagler, 37 Iowa 
i;77; In re First Pres. Church of Bloom- 
field, III Pa. St. 156. The New York 
Code, § 1777. 

Legislature May Cbange Name of Cor- 
poration, Tliough Forbidden to Create by 
Special Act. — Notwithstanding a clause 
in the constitution of a State, that "cor- 
porations may be formed under general 
laws but shall not be created by special 
acts except for municipal purposes," the 
legislature may change the name of a 
corporation, and give it powers to pur- 
chase additional property, no new cor- 
porate powers or franchises having been 
created. Wallace v. Loomis, 97 U. S. 
(7 Otto) 146. 

In the case of Pacific Bank v. Re Ro., 
37 Cal. 538, this question was consid- 



ered, but not determined. The court 
said; "The mere changing the name of 
a corporation is not, as it appears to us, 
the creation of a corporation in the 
sense of the constitution. As suggested 
by the counsel for the plaintiff, it would 
seem that the changing of the name of 
a corporation is no more the creation 
of a corporation than the changing of 
the name of a natural person is the be- 
getting of a natural person. The act, 
in both cases, would seem to be what 
the language, which we use to designate 
it, imports — a change of name and not a 
change of being." Waterman on Corp., 
vol. I, p. 120. 

A Corporation May Eesume Its Old 
Name by Usage. — Even if the legislature 
changes the name of a corporation, yet 
if the corporation continues to do busi- 
ness in its old name, it raa.y regain such 
name by usage, and be lawfully sued or 
proceeded against in bankruptcy by that 
name. Alexander v. Bunev, 28 N. J. 
E. 90. 

2. Boone on Corp., § 31; Ang. & 
Ames, § 354; Mej'er v. Johnston, 8 Am. 
& Eng. R. Cas. 584; Girard v. Phil- 
adelphia, 7 Wall. (U. S.) 1; Rosenthal 
V. Madison, lo Ind. 358; Cohill v. 
Bigger, 8 B. Mon. (Ky.) 213; North- 
western College xt. Schwagler, 37 Iowa 
577; Meyer v. German Lutheran 
Church, 17 Am. & Eng. Corp. Cas. 195; 
s. c, 37 Minn. 241; McGar^- v. People, 
45 N. Y. 153; Shackelford v. Danger- 
field, L. R.; 3 C. P. 407; Morris v. St. 
Paul etc. R., 19 Minn. 528; Wallace v. 
Loomis, 97 U. S. 146; Dean v. La 
Motte Co., 59 Mo. 523. 

A law changing the name of a cor- 
poration does not alter the contract be- 
tween the shareholders, or impair any 
of their franchises. Delaware etc. R. 
Co. T». Irick, 3 Zabr. (N. J.) 321. 

In Re Application of First Presby- 
terian Church of Bloomfield for Change 
of Name, 15 Am. & Eng. Corp. Cas. 
4S1, it was held that the court of com- 
mon pleas of Pennsylvania may change 
the name of a corporation to that of 



138 



Names of Corporations. 



NAME. 



Averment Not Necessary. 



been incorporated under the general laws of a State, but has as- 
sumed no certain name, and has been known by various names, 
such want of name will not affect its identity.^ 

2. Express Averment Not Necessary Where Name Implies a Corpora- 
tion. — In general, it may be stated, that the declaration in a suit 
brought in a corporate name need not aver the plaintiffs to be a 
corporation, where the name is such as might probably be 
adopted by a corporation, and the complaint does not show that 
they are not a corporation ; for, under such circumstances, they 
will be presumed to be a corporation with capacity to sue.^ 



another corporation, but that change 
does not invest the corporation under 
its new name with anv of the property', 
trusts, or charter rights of the corpo- 
ration whose name is taken. 

In Episcopal Charitable Society v. 
Episcopal Church of Dedham, i Pick. 
(Mass.) 372, by Stat. 1793, ch. 68, the 
rector, wardens and vestry of the Epis- 
copal Church of Dedham were invested 
with certain corporate powers, by the 
name of the Episcopal Church of Ded- 
ham; but the proprietors of pews were 
left without any powers, except as a 
voluntary society. In 1879, the rector 
and wardens alone, pursuant to a vote 
of the proprietors, borrowed money 
for the use of the proprietors, and sub- 
scribed a promissory note for it, and 
the agents of the proprietors at differ- 
ent times paid the interest. The Stat. 
1818, ch. 27, incorporated certain per- 
sons and the proprietors of the pews by 
the same name, gave them the control 
of the church property, and repealed 
the former act. The new corporation 
authorized the wardens and vestrj' to 
receive and make payment of all debts 
in favor of or against the church, which 
accrued under the iirst act. Held, that 
the new corporation was answerable on 
the note, or at least on the money 
counts. 

A corporation organized under a 
special charter, and reorganized subse- 
quently under a general law, with a 
change of its name, and, to some ex- 
tent, of its powers, is essentially still 
the same; and a judgment in an action 
brought against it \iy its latter name, to 
adjudge it dissolved for forfeiture of its 
charter, may appropriately cover the 
acts of the original corporation. Su- 
preme Ct. Sp. T. 1862, People ex rel. 
Barton v. Rensselaer Ins. Co., 38 Barb. 
(N. Y.) 323. 

And when, pending a suit by a cor- 
poration, an act of the legislature was 
passed changing the name of the cor- 

1 



poration, if the corporators should con- 
sent, and the suit proceeded to judg- 
ment in the original name, held, that 
it was too late after judgment for the 
defendant to set up that there was no 
such corporation, especially if he fails 
to make it appear that the corporators 
accepted the new name. Water Lot 
Co. V. Bank, 53 Ga. 30. 

1. Wardens x'. Hall, 22 Conn. 132. 

2. Bank of Waterville v. Beltzer, 13 
How. Pr. (N. Y.) 270; Bank of Low- 
ville V. Edwards. 11 How. Pr. (N. Y.) 
216; Bank of Havana v. Wickham, 16 
How. Pr. (N. Y.) 97; Kennedy v. Cot- 
ton, 28 Barb. (N, Y.) 60; United States 
Bank v. Haskins. i Johns. Cas. (N. Y.) 
132; Dutchess Cotton Mfg. v. Davis, 
14 Johns. (N. Y.) 238; Jackson v. 
Plumbe, 8 Johns. (N. Y.) 378; Bank of 
Utica V. Smalley, 2 Cow. (N. Y.) 770; 
s. c, 14 Am. Dec. 526; Bank of Au- 
burn V. Weed, 19 Johns. (N. Y.) 
300; Bank of Michigan v. Williams, 
5 Wend. (N. Y.) 478; Shoe & Leather 
Bank v. Brown, 9 Abb. Pr. (N. Y.) 218; 
Lafaj'ette Ins. Co. v. Rogers, 30 Barb. 
(N. Y.) 491; Clark v. Benton etc. Mfg. 
Co., 12 Wend. (N. Y.) 21S; Proprietors 
of Southold V. Horton, 6 Hill (N. Y.) 
50; Phenix Bank v. Donnell, 41 Barb. 
(N. Y.) 571; Camden etc. R. Co. v. 
Remer, 4 Barb. (N. Y.) 127; Union 
Mut. Ins. Co. V. Osgood, 1 Duer (N. 
Y.) 707. Contra, Johnson v. Kemp, 11 
How. Pr. (N. Y.) 186; Litchfield Bank 
V. Church, 29 Conn. 148; Brown v. 
Illius, 27 Conn. 83; s. c, 71 Am. Dec. 
49; Phoenix Bank v. Curtis, 14 Conn. 
437; s. c 36 Am. Dec. 492; West 
Winsted Sav. Bank v. Ford, 27 Conn. 
282; Plymouth Christian Soc. v. Ma- 
comber, 3 Mete. (Mass.) 235; First 
Parish in Sutton v. Cole, 3 Pick. (Mass.) 
245; Concord v. Mclntire, 6 N. H. 527; 
School District v. Blaisdell, 6 N. H. 197; 
Woodson -0. Bank of Gallipolis, 4 B. 
Mon. (Ky.) 203; Jones v. Bank of Ten- 
nessee, 8 B. Mon. (Ky.) 122; Depew v. 



Names of Corporations. 



NAME. 



Averment Not Necessary. 



Bank of Limestone, i J. J. Marsh. (Kj.) 
380; Bank of Gallipolis v. Trimble, 5 
B. Mon. (Ky.) 599; Taj'lor v. Bank of 
Illinois, 7 T. B. Mon. (Ky.) 576, 584; 
Roxbury v. Huston, 37 Me. 42; Inhabit- 
ants of Orono V. Wedgewood, 44 Me. 
49; s. c, 69 Am. Dec. Si; Norris v. 
Stapes, Hobart 211; Harris v. Muskin- 
gum Mfg. Co., 4 Blackf. (Ind.) 267; s. c., 
29 Am. Dec. 372; Richardson v. St. 
Joseph Iron Co., 5 Blackf. (Ind.) 146; 
s. c, 33 Am. Dec. 460; Jones v. Cincin- 
nati Type Foundry Co., 14 Ind. 89; 
Emery v. Evansville etc. R. Co., 13 Ind. 
143; Cole V. Merchants' Bank, 60 Ind. 
350; Heston v. Cincinnati etc. R. Co., 
16 Ind. 275; Guago Iron Co. v. Daw- 
son, 4 Blackf. (Ind.) 202; Dunning v. 
New Albany etc. R. Co., 2 Ind. 437; 
Railsback v. Liberty etc. Turnpike Co., 
2 Ind. 656; Hubbard v. Chappel, 14 Ind. 
601; O'bonald V. Evansville etc. R. Co., 
14 Ind. 259; Cicero Hygiene Draining 
Co. V. Craighead, 28 Ind. 274; Indian- 
apolis Furnace & Min. Co. v. Herki- 
mer, 46 Ind. 142; Wiles v. Trustees of 
Phillippi Church, 63 Ind. 206; Stein v. 
Indianapolis etc. Assoc, 18 Ind. 237; 
s. c, 81 Am. Dec. 353; Mackenzie v. 
School Trustees, 72 Ind. 189; Beatty v. 
Bartholomew Co. Agi;icultural Soc, 
76 Ind. 91; New Albany etc. R. Co. v. 
Lewis, 49 Ind. 161; Patterson v. In- 
dianapolis Plank Road Co., 56 Ind. 20; 
Hunter v. Burnsville Turnpike Co., 56 
Ind. 203; Walker v. Shelbyville etc. 
Turnpike Co., 80 Ind. 452; Cole v. 
Merchants' Bank, 60 Ind. 350; Ander- 
son V. New Castle etc. R. Co., 12 Ind. 
376; s. c, 64 Am. Dec. 218; Emer^' v. 
Evansville etc. R. Co., 13 Ind. 143; 
Ewing V. Robeson, 15 Ind. 26; Adams 
Express Co. v. Hill, 43 Ind. 157; Indian- 
apolis Sun Co. V. Horrell, 53 'Ind. 527; 
Johnson v. State, 65 Ind. 304; North- 
western Conference v. M^'ers, 36 Ind. 
371;; Grays v. Turnpike, 4 Rand. (Va.) 
578; McKiel V. Real Estate Bank 4 
Ark. 592; Lion Church v. St. Peter's 
Church, 5 W. & S. (Pa.) 215; Benning- 
ton Iron Co. V. Rutherford, 18 N.J. L. 
10";; s. c, 35 Am. Dec. 528; Lake Su- 
perior Building Co. v. Thompson, 32 
Mich. 293; United States v. Insurance 
Cos., 22 Wall. (U. S.) 99; Conrad v. 
Atlantic Ins. Co., i Pet. (U. S.) 450; 
Society for Propagation of the Gospel 
V. Pawlet, 4 Pet. (U. S.) 501; Pullman 
V. Upton, 96 U. S. 328. 

Estoppel. — A contract with a party as 
a corporation estops the party so con- 
tracting to deny the existence of the 
corporation at the time it was contracted 



with as such. Jones v. Cincinnati Type 
Foundry Co., 14 Ind. 89, See also Ham- 
tramck v. Bank of Edwardsville, 2 Mo. 
169; Hubbard v. Chappel, 14 Ind. 601; 
Mackenzie v. School Ti-listees, 72 Ind. 
190. 

But see as to the rule in Netu Tork, 
where it seems that, in a suit by a cor- 
poration, the plaintiffs, when the general 
issue is pleaded, must prove that they 
are a bodv corporate. Welland Canal 
Co. V. Hathaway, 8 Wend. (N. Y.) 
481; s. c, 24 Am. Dec. 51, and cases 
cited. 

See also Williams v. Bank of Michi- 
gan, 7 Wend. (N. Y.) 540; Jackson v. 
Plumbe, 8 Johns. (N. Y.) 378; Bank of 
Michigan v. Williams, 5 Wend. (N. Y.) 
478; United States Bank v. Stearns, 15 
Wend. (N. Y.) 314. 

In The Utica Ins. Co. v. Tilman, i 
Wend. (N. Y.) 555, it was held that a 
corporation was sufficiently proved by 
the production of an exemplified copy 
of the act of incorporation, and evi- 
dence of user under it. 

By sec. 3, R. S. N. Y. (4th ed.) 698, 
in suits hy a domestic corporation, it is 
not necessary to prove its existence un- 
less the defendants plead in bar that the 
plaintiffs are not a corporation. Other- 
wise as to foieign corporations. Will- 
iams V. Bank of Michigan, 7 Wend. (N. 
Y.) 540, 547. note {a). 

See also, in this connection, Dutchess 
Cotton Mfg. Co. V. Davis, 14 Johns. (N. 
Y.) 245; s. c, 7 Am. Dec. 459; Hen- 
riques v. Dutch West India Co., 2 Ld. 
Raym. 1532; Norris v. Staps, Hobart 
211. 

Rule In Regard to Foreign Corporations. 
— The cases in which foreign corpora^ 
tions must prove their existence, under 
the general issue, are exceptions to the 
general rule. School District v. Blais- 
dell, 6 N. H. 197; Lord v. Bigelow, 8 
Vt. 445. 

In Jackson v. Bank of Marietta, 9 
Leigh (Va.) 240, Parker, J., observes: 
" I think it is clearly established that 
although it is not necessary in the dec- 
laration to aver the incorporation, it is 
necessary, under the general issue, to 
prove it. 

See Gray f . Turnpike Co., 4 Rand. 
(Va.) 578; Rees v. Conocochegue 
Bank, '5 Rand. (Va.) 326; s. c, 16 Am. 
Dec. 755; Taylor v. Bank of Alexan- 
dria, e, Leigh (Va.) 471; Jackson v. 
Plumbe, 8 Johns. (N. Y.) 378; Bill v. 
Fourth Great Western Turnpike Co., 14 
Johns. (N. Y.) 416; Bank of Auburn t;. 
Weed, 19 Johns. (N. Y.) 300; Ports- 



140 



Hames of Corporations. 



NAME. 



Variance in Corporate Name. 



3. Variance in Corporate Name in Judgments. — Corporate names 
are no exception to the general rule applied to natural persons : 
that names, with other circumstances, are facts from which ident- 
ity can be presumed or established; and where a judgment is ren- 
dered against a corporation by one name, and execution issued 
upon that judgment under a different name, if both names are in 
fact applied to the same corporation, the apparent difference be- 
tween the two names may be explained and harmonized by ex- 
trinsic evidence.^ 

But if the name of the corporation is mistaken, materially and 
substantially, the corporation cannot be affected by the proceed- 
ings, and the test seems to lie in the distinction made between a 
variance in words and syllables only and a variance in substance. 
If a corporation is sued by a name vaiying only in words and sylla- 
bles, and not in substance, from the true name, the misnomer 
must be pleaded in abatement.^ But if the name be mistaken in 
substance, the suit cannot be regarded as against the corpora- 
tion.* 

4. Variance in Corporate Names in Grants. — A variation from the 
legal designation in a deed, grant or devise to a corporation will 
not make the same void, provided that the corporation meant can 
be sufficiently ascertained from the terms used.* 



mouth Livery Co. v. Watson, lo Mass. 
91; Bank of Utica v. Smallev, 2 Cow. 
(N. Y.) 770; s. c, 14 Am. Dec. 526. 

Wliere Corporation Is Public, — While, 
under the general issue in a suit by a 
corporation, it is necessary for the plain- 
tiff to show its charter, yet where such 
charter is a public law which judicial 
tribunals are bound to notice ex officio^ 
it is not necessary to give it in evidence 
to make out the plaintiff's title. Agnew 
V. Bank of Gettysburg, 2 Hen. & G. 
(Md.) 478. 

1. Talbott V. Hale, 72 Ind. i. 

2. "That a corporation defendant is 
not correctly named in an action can 
only be taken advantage of by plea in 
abatement. Where service is made upon 
the proper officers, and sucli plea is not 
made, the judgment will bind the cor- 
poration, though named by another than 
its Corporate name." Wilson v. Baker, 
52 Iowa 423. See also Burnham 
V. Savings Bank, 5 N. H. 446; Sun- 
apee v. Eastman, 32 N. H. 470; La- 
faj'ette Ins. Co. v. French, 18 How. 
(U. S.) 404; Lehman v. Warner, 61 
Ala. 455; Medway Cotton Manufactory 
V. Adams, 10 Mass. 360; African So- 
ciety V. Varick, 13 Johns. (N. Y.) 38. 

3. Gilbert v. Nantucket Bank, 5 Mass. 
97; Com. V. Dedham, 16 Mass. 141 ; 
Medway Cotton Manufactory v. Adams, 



141 



10 Mass. 360; Society for Propagating 
the Gospel •w. Young, 2N. H.310; Bank 
of Utica V. Smalley, 2 Cow. (N. Y.) 770; 
s. c, 14 Am. Dec. 526. 

A judgment against a corporation 
cannot be corrected nunc p7'0 tunc by 
striking out the name under which the 
defendant was sued and served with 
process, and substituting another name. 
Brown v. Terre Haute etc. R. Co.. 72 
Mo. ff>-;. 

4. inhabitants of the First Parish in 
Sutton V, Cole, 3 Pick. (Mass.) 232; 
Case of the Chancellor of Oxford, 10 
Coke i;7, b; Witman v. Lex, 17 S. & R. 
(Pa.) 88; Vidal v. Girard, 2 How. (U. 
S.) 127; Chapin v. School District, 35 
N. H. 445; Oler v. Baltimore etc. R. 
Co., 41 Md. 5S3; Union Bank of Florida 
V Call. 5 Fla. 409; Northwestern Dis- 
tilling Co. V. Brant, 60 111. 658; s. c, 18 
Am. Rep. 631; O'Brien v. People, 41 
111. 456; Garrison v. People, 21 111. 535; 
State Hospital v. Higgins, 15 III. 185; 
Graves v. People, 11 111. 542; Carderf. 
Fayette Co., 16 Ohio St. 3i;3; Green 
Township v. Campbell, 16 Ohio St. 11; 
Douglass V. Branch Bank of Mobile, lo 
Ala. 650; Brittan v. Newland, 2 Dev.& 
B. (N. Car.) 363; Clark v. Potter Co., 
I Pa. St. 163; Berks etc. Turnpike Co. 
V. Myers, 6 S. & R, (Pa.) 12; s. c, 9 
Am. Dec. 402; Porter v. Blakely, i 



UisceUaneous 



NA ME—NA MED. 



Definition. 



XXV. Miscellaneous.— Instances where the word " name," as em- 
ployed in statutes or legal documents, has been considered by 
the courts, are given in the note.^ 

NAMED.— See note 2. 



Root (Conn.) 440; County Court v. 
Griswold, 58 Mo. 175; Romeo v. Chap- 
man, 2 Mich. 179. 

Mistake in Name Avoided by Pleading 
and Proof. — Where a deed is made to a 
corporation by a name varying from 
the true one, the corporation may sue 
in its true name, and aver in the decla- 
ration that the defendant made the deed 
to them by the name mentioned in the 
deed. Northwestern Distilling Co. v. 
Brant, 69 111. 658; s. c, 18 Am. Rep. 
631. See also N. Y. African Soc. v. 
Varick, 13 Johns. (N. Y.) 39. 

Parol Evidence to Explain Mistake in 
Name. — A departure from the strict 
style of a corporation will not avoid its 
contracts, if it substantiallj' appear that 
the particular corporation was intended; 
and a latent ambiguity may, under 
proper averments, be explained by parol 
evidence. Berks etc. Turnpike Co. v. 
Myers, 6 S. & R. (Pa.) 12; s. c, 9 Am. 
Dec. 402. 

1. ''Name of the Own«r." — Where a 
statute made it lawful to kill dogs not 
wearing a collar " with the name of the 
owner or owners carved or engraved 
thereon," and the plaintiff, Jeremiah P. 
Morey, had engraved upon the collar of 
his dog the letters "J. P. M.," it was 
held that this was not engraving the 
"name" of the owner, within the mean- 
ing of the statute. Morey v. Brown, 42 
N. H. 373. 

Where astatute required that petitions 
for the establishment of a highway 
should be signed with " the names of 
the owners" of land affected, it was 
held that signatures containing only the 
initials of Christian names were not a 
compliance with the statute. Vawter v. 
Gilliland, 55 Ind. 278. 

A similar ruling was made where 
land was owned by partners, and only 
the partnership name was signed. 
Hughes f. Sellers, 34 Ind. 337. 

"Of My Name and Blood." — In a de- 
vise, a remainder was limited "unto the 
first and nearest of mj' kindred, being 
male and of rr^y name and blood, that 
shall be living," etc. The complainant 
was of the testator's blood, but his name 
originally was not that of the testator; 
he had, however, by act of parliament, 
been allowed to change his name to that 

14: 



of the testator. Lord Eldon held that 
he did not answer the description of the 
devise. Leigh v. Leigh, 15 Ves. Jr. 92. 

Name in Notice of Copyright. — Under 
the act of congress requiring a notice of 
copyright to be placed on each copy of 
the copyrighted book or article, the 
" name " of the owner of the copyright 
is sufficiently indicated by his surname 
and the initial of his Christian name. 
Burrow-Giles Lithographic Co. v. Ba- 
rony, III U. S. 53. 

" Sometimes it is made part of the 
description or qualification of a devisee 
or legatee that he' be of the testator's 
name. The word ' name,' so used, ad- 
mits of either of the following interpre- 
tations: I. As designating one whose 
name answers to that of the testator 
(which seems to be the more obvious 
sense); 2. As denoting a person of the 
testator's family — the word ' name ' be- 
ing, in this case, synonymous with 'fam- 
ily' or 'blood.' The former, as being 
the more natural construction, prevails 
in the absence of an explanatory con- 
text; and such is most indisputably its 
meaning when found in company with 
some other term or expression which 
would l)e synonymous with ' name ' it 
otherwise construed." 2 Jarm. on Wills 
141, 146. 

A woman losing the " name " by mar- 
riage, loses her right to be classed as 
one of the "name;" but not so a person 
who assumes another name by licence 
or act of parliament. 2 Jarm. on Wills 
144. 

" Descendants who shall bear the 
name of." V. Re Roberts, 19 Ch. D. 
520; 50 L.J. Ch 265. _ 

2. Where a orovision in a charter 
stated the names of specific officers, to- 
gether with the term ''such other sub- 
ordinate officers as tlie common council 
deem necessary," and later in the same 
section it is stated that "the officers 
above named shall hold their several 
offices for one year,*" it was held 
that the words "above named" apply 
onh' to the officers specifically men- 
tioned. State v. Trenton, 13 Atl. Rep. 
22S; State V. Trenton, 50 N. J. L. 388. 

"Relatives hereinbefore named" in a 
will, held to mean "legitimate relatives 
hereinbefore mentioned nominatim, if 



Definition. NARCOTICS— NATIONAL BANKS. 



Synopsis. 



NARCOTICS.— The act of congress of May 20th, 1887(24 Stat, at 
Large 69), requires that special instruction as to the nature and 
effects of alcoholic drinks and narcotics shall be given in the mili- 
tary and naval schools, in the schools of the District of Columbia, 
and in the Indian schools. Statutes similar in substance have 
been enacted in some of the States.^ 

NARR. — An abbreviation of the word narratio ; a declaration 
in a cause.* 

NATION. — The term " nation " implies a body of men united 
together to procure their mutual safety and advantage by means 
of their union.* 

NATIONAL BANKS— (See BANKS AND Banking). 



II. 



Nature and Organization, 144. 

1. General Nature^ 144. 

2. National Bank Act, 145. 

3. Formation, 145. 

4. Extension or Termination of 

Existence, 147. 

5. Location and Citizenship, 147. 

6. Transaction of Business, 148. 

7. Transformation of State Into 

National Batiks, 149. 
State Control, 150. 

1. State Control in General, i^o. 

2. Jurisdiction of State Courts, 

152- 



3. Place of Bringing Action, 

153- 

4. Attachment Against National 

Banks in Another State, 

154- 

5. Suits for Recovery of In- 

terest Penalties, 154. 
Ill National Control, 155. 

1. National Control in General, 

155- 

2. furisdiction of Federal 

Courts, 156. 

3. Functions of Comptroller of 

Currency, 157. 



not b)' all their names, by some at least." 
Be Jodrell, 61 L. T., N. S.677. This 
was reversed in 59 L. J. R., Ch. 538, it 
being held that the children of persons 
named as cousins, whether legally re- 
lated or not, came within the descrip- 
tion of "relatives hereinbefore named." 

"Relations Hereafter Named." — Where 
a testator left his property' among his 
"relations hereafter named," and none 
were named in the will, it was held that 
the word "named" must be taken in its 
plain sense, indicating an intention to 
specify certain relations, and as testator 
had not done so there was an intestacy. 
Crampton v. Wise, 58 L. T., N. S. 
718. 

In a City Charter. — Where, in a city 
charter, power was given to a common 
council to appoint certain specifically 
designated officers and "other subordi- 
nate officers," and provision was made 
that the "officers above named" should 
hold their offices for one year, it was 
held, construing this section in connec- 
tion with another similar one, that the 
"officers above named" included only 
those particularly designated by name, 
and excluded "other subordinate of- 

14; 



State V. Trenton, 50 N. J. L. 
Georgia, 5 



ficers.' 
388. 

1. Cherokee Nation 
Pet. (U. S.) 1-52. 

The very term "Nation" so generally 
applied to Indians, means a people dis- 
tinct from others. The constitution de- 
claring treaties already made, as well as 
those to be made, to be the supreme 
law of the land, has adopted and sanc- 
tioned the previous treaties with the In- 
dian Nations, and consequently admits 
their rank among the powers who are 
capable of making treaties. The words 
"treaty'" and "nation" are words of our 
own language, selected in our diplomatic 
and legislative proceedings by ourselves. 
Each has a definite and well under- 
stood meaning. We have applied them 
to Indians as we have applied them to 
the other nations of the earth, and in 
the same sense. Langford v, Monteith, 
I Idaho, N. S. 612. See Indians, 10 
Am. & Eng. Encj'C. of Law 38. See 
also International Law, ii Am. & 
Eng. Enc3'C. of Law 432. 

2. As to opium, see Opium , Reve- 
nue Laws. 

3. Bouv. Law Diet. 

;j 



Synopsis. 



NA TIONAL BANKS. Nature and Organization. 



IV. Powers, i6o. 

1. General and Incidental Povj- 

ers^ 160. 

2. Prescribing By-lavjs^ 162, 

3. Acts Ultra Vires, 164. 

4. Lotus Which A re Ultra Vires, 

166. 

5. Powers Concerning Personal 

Property, 166. 

6. Powers Concernitig N'egoti- 

able Instruments, Stocks, 
etc., 167. 

7. Powers Concerning Peal 

Estate, 169. 
V. Liabilities in General, 171. 
VI. Interest and Usury, 172. 

1. Interest in General, 172. 

2. Penalty for Taking Exces- 

sive interest, 174. 

3. Action to Recover Double In- 

terest, 176. 

4. Usurious Interest on Series 

of Renewal Notes, 178. 
VII Taxation, 179. 

1. Taxation in General, 179. 

2. Authority of State to Tax, 

iSo. 

3. Discrimination as Compared 

with Other Moneyed Capi- 
tal, iSi. 

4. Exemption of Portion of 

Other Moneyed Capital, 

183. 

5. Deduction- of Bona Ftde 

Debts, 184. 

6. Deductions in General, 185. 

7. Inequalities in Valuation, etc., 

186. 

8. Place of Taxation, 187. 
g. Limits of Taxation, iSg. 

10. Exemptions from Taxation 

in General, 190. 

11. Restrictions Upon Municipal 

Taxation, 191. 

12. Alode of Assessment, 191. 

13. Inspecting Powers of State 

Authorities, etc., 192. 

14. Collection of Taxes on Shares, 

192. 
VIII. Stock and Stockholders, 193. 

*. Stockholders in General, 193. 

2. Rights of Stockholders, 194. 

3. Stockholders' Right to Vote, 

194. 



4. Liabilities of Stockholders, 

194. 

5. Lidividual Liability of Stock- 

holders, T.i)^. 

6. Assessments Upon Stockhold- 

ers, 196. 

7. Recovery of Assessments, 

197. 

8. Specification of Capital Stock, 

etc., at Formation of Bank, 
197. 

9. Increase of Capital Stock, 

197. 

10. Reduction of Capital Stock, 

198. 

11. Transfer of Stock in General, 

198. 

12. Failure to Make Transfer on 

Books, 199. 

13. Evasive or Colorable Trans- 

fers, 200. 

14. Loans by Bank on Its Stock, 

or Purchase Thereof, 201. 
I ^. Lien by Bank on Its Stock, 
201. 
IX. Officers, 201. 

1. Officer^ in General, 201. 

2. President, 203. 

3. Cashier, 203. 

4. Teller, 204. 

5. Directors, 204. 
X. Circulation, 205. 

XI. Deposits, 206. 
XII. Collections, 207. 

XIII. Payments, 207. 

XIV. Loans and Discounts, 20S. 
XV. Winding Up and Liquidation, 

208. 

1. Winding Up, 208. 

2. Receiver, 209. 

3. Insolvency, 211. 

4. Preferences' 2\2. 

5. Claims Against Suspended 

Bank, 213. 
XVI. Suits and Remedies, 213. 

1. Jurisdiction Over Suits or 

Proceedings 213. 

2. Parties and Pleadings, 214. 

3. Maintenance of Actions, 2H. 

4. Trials, 215. 

5. Appeals, 215. 

6. Remedies By and Against, 

215. 

7. Attachment, 216. 



I. Nature and Organization— 1. General Nature — Description of. 

— National banks are private associations authorized by congress 
for the joint purposes of convenience and profit to the holders of 
United States bonds, and of furnishing the public with a conven- 
ient and uniform circulating medium. They were intended to be 

144 



Nature and NATIONAL BANKS. Organization, 

to the nation what a well-regulated system of State banks was to 
the States, respectively.^ 

Resemblance to Former United States Bank. — The qualities, 
powers, and duties, as national agencies, of these associations, re- 
semble, in almost all essential particulars, those of the bank of 
the United States authorized by the act of April loth, 1816. 
But they are much more intimately associated with the national 
government in their functions and operations than was that 
bank. 2 

2. National Bank Act. — By an act passed February 25th, 1863, 
and amended and re-enacted on the 3rd of June, 1864, which is 
known as the National Bank act,^ congress provided for the or- 
ganization of national banking associations for the purpose of 
enabling the national government to exercise more effectually its 
constitutional powers and functions.* 

Object of Act, — The object of the national banking act was to 
establish a system of national banking institutions, in order to 
provide a uniform and secure currency for the people, and to 
facilitate the operations of the treasury of the United States.* 

Constitutionality of Act. — The constitutionality of the national 
bank act is beyond all question. It rests on the same principle, 
as does the act creating the second bank of the United States.® 

3. Formation in General. — A national banking association may be 
formed by any number of natural persons, not less than five, who 
shall enter into articles of association to be signed by them, and 

1. Stetson V. Bangor, 56 Me. 274; prohibiting the establishment of bank- 
«. c, I Nat. Bank Cas. 520. See also ing companies without authority of 
Van Allen w. Assessors, 3 Wall. (U. S.) the legislature does not apply to 
573; s.c, I Nat. Bank Cas. I ; Mercantile national banks. Stetson v. Bangor, 
Nat. Bank -v. Mayor etc. of N. Y., 121 56 Me. 274; s. u., i Nat. Bank Cas! 
U. S. T3S; s. c, 18 Am. & Eng. Corp. 520. 

Cas. 92; s. c, 3 Nat. Bank Cas. 243, 5. Mercantile Nat. Bank v. Mayor 

257; Flint V. Board of Aldermen, gg etc. of N. Y., 121 U. S. 138; s. c", 3 

Mass. 141; s. c, I Nat. Bank Cas. 571. Nat. Bank Cas. 243; s. c, '18 Am. 

Compare National Currency acts, 11 & Eng. Corp. Cas. 92. See also Van 

Op. Atty. Gen. 334. Allen v. Assessors, 3 Wall. (U. S.) 1573; 

2. Chase, C. J., in Van Allen v. s. c, i Nat. Bank Cas. i. Comfare 
Assessors, 3 Wall. ( U. S.) 573; o. c, i National Currency Acts, 11 Op. Atty. 
Nat. Bank Cas. i. Gen. 334. Concerning these associa- 

3. See declaration to this effect in tions as governmental agencies, see 
act of June 3rd, 1874, ch. 343, p. 123, Farmers' etc. Nat. Bank v. Dearing, 91 
given in note to Rev. Stat. U. S. (2nd U. S. 29; s. c, i Nat. Bank Cas. 117; 
ed. 1878), § 5133, p. 992. and First Nat. Bank v. Lamb, 57 Barb' 

4. Van Allen v. Asse.ssors, 3 Wall. (N. Y.) 429. 

;U. S.) 573; s. c, I Nat. Bank Cas. i. 6. Farmers' etc. Nat. Bank v. Dear- 

The statutes of the United States regu- ing, 91 U. S. 29; s. c, i Nat. Bank Cas. 

lating the organization, conduct and dis- 117, 120; s. u., regarding as applicable 

solution of national banking associa- the reasoning in McCulloch v. Mary- 

tions are contained in the revised stat- land, 4 Wheat. (U. S.) 316, and Os- 

utes (Rev. Stat. U. S. (2nd ed.), 187S, borne ' -y. Bank of the United States, 9 

tit. LXII., §§ 5133-5243). and in vari- Wheat. (U. S.) 738. See also Van 

ous enactments subsequent thereto. 2 Allen v. Assessors, 3 Wall (U S ) 577- 

Abb. L. Diet. 148. A State statute s. c, i Nat. Bank Cas. i. ' ' ^''^' 
16 C. of L.— 10 145 



Nature and NA TIONAL BANKS. Organization. 

filed in the office of the comptroller of the currency/ and shall 
make an organization certificate to be also recorded and pre- 
served by the same officer,^ and no authority other than that con- 
ferred by congress is necessary to enable a bank existing under a 
special or a general State law to become a national banking 
association.* 

Articles of Association. — The national bank act provides that 
national banking associations shall enter into articles of associa- 
tion, which shall specify in general terms the objects for which the 
association is formed,* and may contain any other provisions, not 
inconsistent with the provisions of the act, which the association 
may see fit to adopt for the regulation of the business of the 
association and the conduct of its affairs.''' And it is further re- 
quired that these articles shall be signed by the persons uniting 
to form the association, and that a copy of them shall be for- 
warded to the comptroller of the currency, to be filed and pre- 
served in his office.^ 

Certificate of Organization. — The contents and disposition of 
the organization certificate are prescribed by the act.' It seems to 
be well settled that a copy of the certificate of organization of a 
national bank, which is certified by the comptroller of the cur- 
rency and authenticated by his seal of office, is competent evi- 
dence® of the existence of the corporation.* But there is not 
entire uniformity among the decisions as to the effect of such cer- 
tificate. Some of the cases appear to hold merely that it makes 
out a prima facie case in favor of the existence of the corpora- 
tion, when supplemented by other evidence of like purport.^® Yet, 
other rulings, perhaps more authoritative, including a decision 
of the United States Supreme Court, regard the certificate of the 
comptroller as conclusive as to the completeness of the organiza- 
tion of a national bank.'^ 

1. U. S. Rev. Stat., § 5133. partially ments are made in Davis v. Stevens, 17 
quoted in BuUard v. Nat. Eagle Bank, Blatchf. (U. S.) 259; Chatham Nat. 
18 Wall. (U. S.) 589; s. u., 1 Nat. Bank Bank v. Merchants' Nat. Bank, 4 
Cas. 93. Thomp. & C. (N. Y.) 196. 

2. U. S. Rev. Stat., § 5134. 8. Tapley v. Martin, 116 Mass. 275; 

3. Case^' v. Galli, 94 U. S. 673, 678; s. c, i Nat. Bank Cas. 611, relating to 
s. c, I Nat. Bank Cas. 142. competency in a State court. See also 

4. The provisions of the National First Nat. Bank v. Kidd, 20 Minn. 234; 
Currency act of June 3rd, 1864 (13 U. S. s. c, i Nat. Bank Cas. 935. 

Stat, at Large 99), and of the amenda- 9. Mix v. National Bank, 91 111. 20; 

tory act of March 3rd, 1865 (Id. 484), s. c, 33 Am. Rep. 44; s. c, 2 Nat. Bank 

authorize the creation of banking as- 232. 

sociations without the right to obtain, 10. Mix v. National Bank, 91 111. 20; 

issue and circulate notes. National s. c, 33 Am. Rep. 44; s. c, 2 Nat. Bank 

Currency acts, II Op. Attj'. Gen. 334. Cas. 232. See also Merchants' Ex- 

5. U. S. Rev. Stat., § 5133; Act of change Nat. Bank t;. Cardozo, 35 N.Y. 
1864, § 5, substantially quoted in Lock- Super. Ct. 162. 

wood V. Mechanics' Bank, 9 R. I. 308; 11. Casey v. Galli, 94 U. S. 673; 

s. c, II Am. Rep. 253. s. c, i Nat. Bank Cas. 142. See also 

6. U. S. Rev. Stat., § 5133. Thatcher v. West River Nat. Bank, 19 

7. U. S. Rev. Stat, §§ Si34i 5i3S- Mich. ig6; s. c, i Nat. Bank Cas. 622; 
References to some of the require- Nalional Bank v. Phoenix Warehousing 

146 



Nature and NATIONAL BANKS. Organization. 

Other Evidence of Organization. — In an action, however, by a 
national bank against the maker of a promissory note, the fact 
that the note is made payable at the plaintiff bank, without such 
bank being a party to the note, is not conclusive evidence that 
such bank is a corporation.^ 

4. Extension or Termination of Existence — Effect of Extension. — 
Where the term of existence of a national bank, which would 
otherwise have expired in 1883, was by act of congress prior to 
that time extended twenty years longer, the identity of the old 
corporation was in no wise affected, but it simply obtained a new 
lease of life.^ 

Effect of Closing Up Business. — Where, however, a national 
bank has determined to close its business and not to avail itself 
of the right given by the statute of the United States, to con- 
tinue after the term of twenty years, the corporation, as such, is 
not wholly dissolved and reduced to a nominal existence without 
power to elect directors. ^ 

5. Location and Citizenship — Where National Bank "Located" or 
"Established!' — A national banking association is "located" or 
"established" at the place specified in its organization certificate 
as that where its operations are to be carried on.* 

Citizenship of Bank. — It may be treated for jurisdictional pur- 
poses, as a citizen of the State within which it is, in this sense, 
"located,"" and the fact that it is incorporated under an act of 
congress of the United States does not make it a citizen of the 
United States exclusively, or necessitate the removal to the 
federal courts of an action brought by it against a citizen of the 
State in which it is located.® Yet, as a citizen of the State in 



Co., 6 Hun (N. Y.) 71. The first of the dition of corporation closing up its 
cases cited in this note laid down the affairs, Crease v. Babcock, 23 Pick, 
doctrine as applicable in a suit against (Mass.) 334; Thornton v. Marginal 
a stockholder to enforce his liability, or Freight R. Co., 123 Mass. 32; First 
against a party upon his contract with Nat. Bank v. Colby, 21 Wall. (U. S.) 
the bank. The second regarded it as 615; and Central Nat. Bank v. Con- 
immaterial that the bank was shown to necticut Mut. L. Ins. Co., 104 U. S. 
have been doing business before the 54. 
date of the organization certificate. 4. Manufacturers' Nat. Bank v. 

1. Hungerford Nat. Bank v. Van Baach, 2 Abb. (U. S.) 232; s. c, 8 
Nostrand, 106 Mass. 559; s. c, i Nat. Blatchf. (U. S.) 137; s. c, i Nat. Bank 
Bank Cas. 559. As to variance in name Cas. 161. See to like effect, Main v. 
of bank, see Washington Co. Nat. Second Nat. Bank, 6 Biss. 26; s. c, i 
Bank v. Lee, 112 Mass. 521. As to Nat. Bank. Cas. 200. 

proof of doing business, see Merchants' 5. See St. Louis Nat. Bank v. Allen, 

Nat. Bank v. Glendon Co., 120 Mass. 2 McCrary (U. S.) 92. 

97. Putting organization in issue, see 6. Davis v. Cook, 9 Nev. 134; a. u., 

on this subject Huffaker v. National i Nat. Bank Cas. 656; relying upon 

Bank, 12 Bush (Ky.) 287; s. c, i Nat. full discussion of subject in Manu- 

Bank Cas. 1504; National Bank v. Or- facturers' Nat. Bank v. Baach, 2 Abb. 

cutt, 48 Barb. (N. Y.) 256. (U. S.) 232; s. c, 8 Blatchf. (U. S.) 

2. National Exch. Bank v. Gay, 57 137; s. c, i Nat. Bank Cas. 161. The 
Conn. 224. State case points out that though a 

3. Richards v. Attleborough Nat. corporation existing by virtue of an 
Bank, 148 Mass. 187; citing, as to con- act of congress of the United States 

.147 



Nature and 



NATIONAL BANKS. 



Organization. 



which it is located, it may be entitled to remove into the federal 
courts an action against a bank in another State.-' 

Citizenship of Shareholders. — So it has been held in a circuit 
court that on the strength of the citizenship of its shareholders 
in the State^ in which it is located, it may be a citizen of that 
State and sue an individual in the federal courts of another 
State of which such individual is a citizen, because the controversy 
then arises between citizens of different States.* 

Recent Enactments. — But all that has been stated concerning 
suits or their removal must be understood as expressing the state 
of the law prior to recent enactments of 1882 and 1888 of the 
most material bearing upon the matter.* 

6. Transaction of Business — Place of. — Under the provision that 
the usual business of each national banking association shall be 
transacted at an ofifice, or banking house located in the place 
specified in its organization certificate,^ it would not, be compe- 
tent for a national bank to provide for the cashing of checks 
upon it at any other place than at its ofifice or banking house,® 
and it cannot make a valid contract for the cashing of checks 



must be considered as a citizen of the 
United States, yet a citizen of the 
United States resident in anj' State in 
the Union is a citizen of that State, 
and cites upon this matter Gassies v. 
Ballon, 6 Pet. (U. S.) 761. 

1. Chatham Nat. Bank?'. Merchants' 
Nat. Bank, 4 Thomp. & C. (N. Y.) 
196; s. c, I Nat. Bank Cas. 769. De- 
cisions adverse to such removals were, 
however, made in Pettilon v. Noble, 7 
Biss. (U. S.) 449; s. c, 2 Nat. Bank 
Cas. 120; Widder v. Union Nat. Bank, 
2 Chic. Leg. News 84; s. c, 2 Nat 
Bank Cas. 124. 

"Hatpltation." — Prior to the amend- 
ment of the Judiciary act the "habita- 
tion" of the national bank for purposes 
of suit was held to be in the federal 
district in which it was located. Main 
V. Second Nat. Bank, 6 Biss. (U. S.) 
26; s. c, I Nat. Bank Cas. 200. But 
compare Commercial Bank v. Simmons, 
10 Abb. L. J. 155; s. c, I Nat. Bank 
Cas. 294; Mitchell v. Walker, 25 Int. 
Rev. Rec. 64; s. c, 2 Nat. Bank Cas. 
180. As to change in Judiciary act, 
see Osgood v. Chicago etc. R. Co., 6 
Biss. (U. S.) 330. As to locality, etc., 
of corporations in general, the Main 
case relies upon Bank of Augusta v. 
Earle, 13 Pet. (U. S.) 519; Day v. 
Newark India Rubber Mfg. Co., i 
Blatchf. (U. S.) 62S, and Pomeroy v. 
New \ork etc. R. Co., 4 Blatchf. (U. 
S.) 120. 



148 



2. See Manufacturers' Nat. Bank v. 
Baach, 2 Abb. (U. S.) 232; s. c, 8 
Blatchf. (U. S.) 147; s. c, i Nat. Bank 
Cas. 161. 

3. National Park Bank v. Nichols, 
4 Biss. (U. S.) 315. Compare St. 
Louis Nat. Bank v. Allen, 2 Mc- 
Crary (U. S.) 92. In the former of 
these cases reference is made to the 
doctrine of the United States Supreme 
Court, modifying Bank of the United 
States V. Deveaux, 5 Cranch (U. S.) 
61, that it is an irrebuttable presump- 
tion that the individual members of a 
corporation are citizens of the State in 
which the corporation is located. This 
point is fully considered in Ohio etc. R. 
Co. V. Wheeler, i Blatchf. (U. S.) 286. 
See also to like effect subsequent cases 
of Paul V. Virginia, 8 Wall. (U. S.) 
168; Baltimore etc. R. Co. v. Harris, 12 
Wall. (U. S.) 65; Home Ins. Co. v. 
Morse, 20 Wall. (U. S.) 445; Hatch v. 
Chicago etc. R. Co., 6 Blatchf. (U. S.> 
105; Terry v. Imperial Ins. Co., 3 Dill. 
(U. S.) 408. But compare WilHams v. 
Missouri etc. R. Co., 3 Dill. (U. S.) 
267. See Corporations, 4 Am. & 
Eng. Ency. of Law 276. 

4. See Leather Manufacturers' Bank 
V. Cooper, 120 U. S. 778; s. c, 3 Nat.. 
Bank Cas. 208; First Nat. Bank v. 
Forrest, 40 Fed. Rep. 705. 

5. U. S. Rev. Stat., § 5190. 

6. Armstrong v. Second Nat. Bank,. 
38 Fed. Rep. 883. 



Nature and NA TIONAL BANKS. Organization. 

upon it, at a different place from that of its location, through the 
agency of another bank.^ 

Time of Commencing. — So whatever the terms of such an 
arrangement, yet if it is made before the date of the certificate of 
authorization of the drawee bank, it is invalid under the pro- 
vision^ that no banking association shall transact any business 
except such as is incidental and necessarily preliminary to its 
organization, until it has been authorized by the comptroller of 
the currency to commence the business of banking.^ 

7. Transformation of State Into National Banks — In General.— The 
act of congress providing for the organization of national banking 
institutions was intended not only to provide for the organization 
of new banks, but to absorb the old, and establish a general ex- 
clusive banking system for the whole country; and it, therefore, 
provided for the reorganization of the existing State banks.* 
Thus a bank existing under a special or general State law may, 
by complying with prescribed requirements, become a national 
banking association under the provisions of the national bank 
act.^ 

Ad Interim Directors, etc. — In prescribing the mode in which 
State banks' may become national banks, the national bank or 
currency act provides that the articles of association and the 
organization certificate may be executed by a majority of the 
directors of the bank or banking institutions, etc., and that the 
directors aforesaid® may be the directors of the association until 
others are elected or appointed in accordance with the provisions 
of the act.' 

Status of Reorganized Bank. — The general scheme of the 
national banking act is that State banks may avail themselves of 
its privileges and subject themselves to its liabilities, without 
abandoning their corporate existence, without any change in the 
organization, officers, stockholders, or property, and without in- 

1. Armstrong v. Second Nat. Bank, under legislative provisions. State v. 
38 Fed. Rep. 883. National Bank, 33 Md. 75; s. c, i Nat. 

2. U. S. Rev. Stat., § 5136. Bank Cas. 527. 

3. Armstrong v. Second Nat. Bank, District of Columbia. — As to right of 
38 Fed. Rep. 883. savings banks in the District of Colum- 

4. State V. Phoenix Bank, 34 Conn, bia to avail themselves of the lavf, see 
205. Keysert). Hitz, 2 Mackey (D. C.) 473. 

5. Rev. Stat. U. S., §§ SiS4i S'SS; Sco- 6. These words mean those who were 
field V. State Nat. Bank, g Neb. 316; s. the directors of the State bank, whether 
c, 31 Am. Rep. 412; Lockwood t;. Me- thej' signed the articles of association 
chanics' Nat. Bank, g R. I. 308; s. c, 11 and the organization certificate or not. 
Am. Rep. 253; Coffey v. National Bank, Lockwood v. Mechanics' Nat. Bank, g 
46 Mo. 140; s. c, 2 Am. Rep. 488. R. I. 308'; s. c, 11 Am. Rep. 253; s. c. 

Want of State Authority. — No author- i Nat. Bank Cas. 895. 

ity from the State is necessary to enable 7. Act of 1864, § 44; ist sess. 38th 

the bank so to change its organization, congress, chap. 106. As to recognition 

Casey v. Galli, 94 U. S. 673, 678; s. c, of nonacting directors, see Lockwood 

I Nat. Bank Cas. 142. Nor can the v. Mechanics' Nat. Bank, g R. I. 308; 

State continue to exact from a State s. c, 11 Am. Rep. 253; s.c, i Nat. Bank 

bank s9 reorganized a bonus imposed Cas. 895. 

. Ii9 



State Control. 



NATIONAL BANKS. 



In General. 



terruption of their pending business or contracts.^ And even 
where a national bank does not adopt the mode of transfor- 
mation prescribed by the act of congress, yet, if it is, in fact, 
organized as the successor of a State bank with the consent of 
more than two-thirds of the stockholders, it has been held that 
such bank may hold and own assets of its predecessor, although 
in form it was organized as a new bank, and the assets were trans- 
ferred to it as if by sale and purchase.* 

II. State ContkOl — 1. State Control in General — Subject to Per- 
mission of Congress. — National banks organized under the act are 
the instruments designed to be used to aid the government in 
the administration of an important branch of tlie public service;* 
and as. congress, which is the sole judge of the necessity for their 
creation, has brought them into existence, the States can exercise 
no control over them, nor in any wise affect their operation, ex- 
cept so far as congress may see proper to permit.* 



stockholders. — As to effect of trans- 
formation upon nontransferable and 
qualified stockholders, see State v. 
Phoenix Bank, 34 Conn. 205; s. c, note, 
I Nat. Bank Cas. 930-31; State v. Hart- 
ford Bank, 34 Conn. 240, 246-47; s. c, 
note, I Nat. Bank Cas. 931. 

Legacy In Bank Shares. — As to effect 
of transformation upon legacy in bank 
shares, see Maynard v. Mechanics' 
Bank, 7 Phila. (Pa.) 6; s. c, i Nat. 
Bank Cas. 892, citing, as to ademption 
of legacy, i Roper on Legacies, 240, 
241; Walton V. Walton, 7 Johns. Ch. 
(N. Y.) 258; and Bringhurst v. Cuth- 
bert, 6 Binn. (Pa.) 398. 

1. City Nat. Bank v. Phelps, 97 N. 
Y. 44; s. c, 49 Am. Rep. 513. See also, 
to like effect, Coffey -v. National Bank, 
46 Mo. 140; s. c, 2 Am. Rep. 48S; s. c, 
I Thomp. Nat. Bank Cas. 644. 

Action on Continuing Guaranty.— A 
national bank changed from a State 
bank maj' maintain an action on a con- 
tinuing guaranty for loans, for fresh 
advances, as well as on those made prior 
to its reorganization. City Nat. Bank 
V. Phelps, just cited, and reported on a 
former appeal in 86 N. Y. 484, and be- 
low in 16 Hun (N. Y.) 158. 

Foreclosing Mortgage. — So a reorgan- 
ized national bank may foreclose a 
mortgage assigned to it by the State 
bank out of which it was formed, and 
to which the mortgage was given. Sco- 
field V. State Nat. Bank, 9 Neb. 316; s. 
c, 31 Am. Rep. 412, where the transfer 
is held not to be invalid, and citation is 
made of Union Nat. Bank v. Matthews, 
98 U. S. 621. 



Other Rights and Liahilltles. — As to 
validity of assignment to reorganized 
national bank of right of action for 
officer or agent's improper dealing with 
property, see Grocers' Nat. Bank v. 
Clark, 48 Barb. (N. Y.) 26; s. c, 32 
How. Pr. (N. Y'.) 160. As to liability of 
transformed bank for conversion of 
special deposits, see Coffey v. National 
Bank of Missouri, above cited. As to 
want of set-off against reorganized 
bank, see Thorpe v. Wegefarth, 56 Pa. 
St. 82; s. u., 93 Am. Dec. 789. Reor- 
ganized national bank is proper party 
to be sued for a reward offered by the 
State bank. Kelsey v. National Bank, 
69 Pa. St. 426; s. c, I Nat. Bank Cas. 
S47. 

State Enabling Acts. — For the con- 
struction of State enabling acts, see 
Thomas v. Farmers' Bank, 46 Md. 43; 
s. c, 2 Nat. Bank Cas. 24S; Atlantic 
Nat. Bank v. Harris, iiS Mass. 147; s. 
c, 2 Nat. Bank Cas. 454; Claggett v. 
Metropolitan Nat. Bank", 4 N. Y. Supp. 
115; Claflin V. Farmers' etc. Bank, 5^ 
Barb. (N. Y.) 228. 

2. Bank v. Mclnfire, 40 Ohio St. 528; 
s. c, 3 Nat. Bank Cas. 707. 

As to a State bank succeeding a na- 
tional bank, see Eans v. Exchange Bank, 
79 Mo. 282. 

3. But for view of these banks as pri- 
vate corporations, etc., see Branch v. 
United States, 12 Ct. of CI. 281; s. c, i 
Nat. Bank Cas. 363. 

4. Farmers' etc. Nat. Bank v. Dear- 
ing, 91 U. S. 29; s. c, I Nat. Bank Cas. 
117; citing, as to the authority of the 
States in general, McCuUoch v. Mary- 



160 



state Control. 



NATIONAL BANKS. 



In General. 



Taxation by States. — But the power of the States to tax the 
existing national banks lies within the category of those govern- 
mental powers which the States may exercise, at least with the 
consent of congress.* 

Scope of State Legislation. — So in general the national banks, 
as federal agencies, are exempted from State legislation only so 
far as that legislation may interfere with or impair their efificiency 
in performing the functions by which they are designed to 
serve the government of the United States;^ and, in fact, these 
banks are subject to the laws of the State, and are governed in 
their daily business far more by the laws of the State than of the 
nation.^ 



land, 4 Wheat. (U. S.) 316; Weston v. 
Charleston, 2 Pet. (U. S.) 466; Brown v. 
Maryland, 12 Wheat. (U. S.) 419; Dob- 
bins ti. Erie Co., 16 Pet. (U. S.) 435; 
Oilman v. Philadelphia, 3 Wall. (U. S.) 
'jiy^axiA Ex parte McNeil, 13 Wall. (U. 
S.) 240. Portions of the opinion in the 
case first noted are quoted in Central 
Nat. Bank v. Richland Nat. Bank, 152 
How. Pr. (N. Y.) 136, 138; s. c, i Nat. 
Bank Cas. 801. 

1. Farmers' etc. Nat. Bank v. Dear- 
ing, 91 U. S. 29; s. c, I Nat. Bank Cas. 
117. See also, concerning taxation of 
national bank shares, Van Allen v. As- 
sessors, 3 Wall. (U. S.) 573; s. c, I Nat. 
Bank Cas. i; affirmed in People v. 
Commrs. of Taxes, 4 Wall. (U. S.) 244; 
s. c, I Nat. Bank Cas. 9, and in Bradley 
V. People, 4 Wall. (U. S.) 459; s. c, 

1 Nat. Bank Cas. 14. Even under 
the original act of 1863 national 
bank shares were held taxable by 
State authority in Stetson v. Bangor, 
56 Me. 274; s. c, I Nat. Bank Cas. 520, 
which relies upon questions of consti- 
tutional taxation) etc., on McCuUoch v. 
Maryland, 4 Wheat. (U. S.) 316; Weston 
V. Charleston, 2 Pet. (U. S.) 449; Bank 
of Commerce v. N. Y. City, 2 Black 
(U. S.) 620; Osborne v. Bank of U. S.,' 
9 Wheat. (U. S.) 738; Bank Tax Case, 

2 Wall. (U. S.) 200; Providence Bank 
V. Billings, 4 Pet. (U. S.) 563; Sturgis 
w. Crowninshield, 4 Wheat. (U. S.) 122; 
Wilson V. Blackbird Creek Marsh Co., 
2 Pet. (U. S.) 245; Cooley v. Port War- 
dens of Philadelphia, 12 How. (U. S.) 
299; and Gibbons v. Ogden, 9 Wheat. 
(U,. S.) 200. As to conditions and res- 
ervations upon the exercise of the power 
of the States to tax anything pertaining 
to national banks, see Maguire x'. Board 
of Revenue etc., 71 Ala. 401; s. c, 6 
Am. & Eng. Corp. Cas. 452. Concern- 
ing right of State taxation, consult also 



full discussion in First Nat. Bank v. 
Com., 9 Wall. (U. S.) 353; s. c, 1 Nat. 
Bank Cas. 34. 

2. Thomas v. Farmers' Bank, 46 Md. 
43; s. c, 2 Nat. Bank Cas. 248. 

3. First Nat. Bank v. Com., 9 Wall. 
(U. S.) 353; s. c, I Nat. Bank Cas. 3^1. 
AH their contracts, as is pointed out in 
this case, are governed and construed 
by State laws. Their acquisition and 
transfer of property, their right to col- 
lect their debts, and their liability to be 
sued for debts, are all based on State 
law. It is only when the State law in- 
capacitates the banks from discharging 
their duties to the government that such 
law becomes unconstitutional. The 
argument that these banks are financial 
agents of the government, and, as such, 
exempt from State legislation, based 
on the statements of Chase, C. J., in 
Van Allen v. Assessors, 3 Wall. (U. 
S.) 589; s. c, I Nat. Banlc Cas. i, is 
combatted and confined to adverse leg- 
islation, and not as authorizing exemp- 
tion from State process for breach of 
contract, in Talmage v. Third Nat. 
Bank, 91 N. Y. 531 ; s. c, 1 Am. & Eng. 
Corp. Cas. 148. See also First Nat. 
Bank v. Lamb, 50 N. Y. 95. 

Restriction Upon Extra-state National 
Bank. — In Ne-w Tori:, a national bank 
organized under the laws of the United 
States and doing business in another 
State is prohibited from keeping an of- 
fice of discount or deposit in the State 
of New York, and cannot maintain an 
action upon any note discounted by it 
at such office. National Bank x<. Phce- 
nix Warehousing Co., 6 Hun (N. Y.) 
71; s, c, I Nat. Bank Cas. 784.' 

In Winter v. Baldwin (Ala.), 31 Am. 
& Eng. Corp. Cas. 406, it was held that 
the provisions of \ 1677 of the Code, 
giving stockholders of private corpora- 
tions the right to inspect the corporate 



151 



state Control. 



NA TIONAL BANKS. 



Jurisdiction of. 



2. Jurisdiction of State Courts — In General. — It has been held 
that State courts have jurisdiction of suits brought by national 
banks, because such courts may exercise jurisdiction in cases 
authorized by the laws of the State, and not distinctly prohibited 
by enactments fixing the exclusive jurisdiction of the federal 
courts.^ 

Governing Provisions. — Any objection to the jurisdiction, in 
cases where a national bank is a party to the action, founded 
upon the character of the association as an instrument of the 
national government, is met by the existence of an express pro- 
vision in the act of congress,^ whereby sOits, actions and proceed- 
ings against any such association may be had not only in the 
federal courts, but also in any State, county, or municipal court 
in the county or city in which said association is located, having 
jurisdiction in similar cases ;^ and this provision has been extended 
by construction to cover actions by as well as against such asso- 
ciations.* 

Provision as Permissive or Otherwise. — But there is a conflict 
in the decisions upon the question whether suit may also be 
brought in a State other than that in which the national bank is 
legally located.* 



books and papers, apply to national 
banks within the State as well as to 
other corporations, and that §§ 5240 
and 5241 of the U. S. Rev. Stat., pro- 
viding for national bank examiners, and 
exempting national banks from all visi- 
torial powers other than those author- 
ized by congress, or vested in courts of 
justice, did not affect the statutory right 
of the stockholder. 

1. First Nat. Bank v. Hubbard, 49 
Vt. i; s, c, I Nat. Bank Cas. 912; s. c, 
24 Am. Rep. 97. See also, to like eifect, 
Adams v. Daunis, 29 La. An. 315; o. c, 
I Nat. Bank Cas. 510. Concerning the 
principles regulating this matter, see 
Ordway v. Central Nat. Bank, 47 Md. 
217; s. c, I Nat. Bank Cas. 559; s. c, 
28 Am. Rep. 455, 460, stating the con- 
clusion reached in i Kent's Com. 396, 
400, and following and quoting the de- 
cision in Claflin v. Houseman, 93 U. S. 
130; also Crocker v. Marine Nat. Bank, 
loi Mass. 240; s. c, 3 Am. Rep. 336; 
citing, besides i Kent's Com. (6th ed.) 
396, et seq.; the cases of Bank of United 
States V. Deveaux, 5 Cranch (U. S.) 85, 
and Osborn v. Bank of United States, 9 
Wheat. (U. S.) 738, neither of which 
seems to be directly in point; and the 
more pertinent cases of Teall v. Felton, 
I N. Y. 537; s. c, 12 How. Pr. (N. Y.) 
284, and Ward v. Jenkins, 10 Mete. 
(Mass.) 583; also First Nat. Bank v. 



Overman, 22 Neb. 116; s. c, 3 Nat. 
Bank Cas. 556, which, substantially 
quotes the statement of the ruling in 
Claflin V. Houseman, 93 U. S. 130, 
made in Hade v. McVay, 31 Ohio St. 
231; s. c, 2 Nat. Bank Cas. 353. Con- 
sult, further, Holmes w. National Bank, 
18 S. Car. 31; s. c, 44 Am. Rep. 558; 
Robinson v. National Bank, 81 N. Y. 
385; s. c, 37 Am. Rep. 508; Bletz v. 
Columbia Nat. Bank, 87 Pa. St. 87; s. c, 
30 Am. Rep. 343; s. c, 2 Nat. Bank Cas. 
366. 

Keeeiver's Suit Against Directors.— 
An action may be brought in a State 
court by a receiver or a stockholder of 
a national bank against its directors for 
negligence, etc., causing loss of funds. 
Brinckerhoff' v. Bostwick, 88 N. Y. 52; 
0. c, 3 Nat. Bank Cas. 591. 

2. National Bank act, § 57; 13 U. S. 
St. at Large 116. 

3. Bank of Bethel v. Pahquioque 
Bank, 14 Wall. (U. S.) 383; s. c, i Nat. 
Bank Cas. 77. 

4. First Nat. Bank v. Hubbard, 49 
Vt. i; s. c, I Nat. Bank Cas. 912; s. c, 
24 Am. Rep. 97, following a like con- 
struction in Kennedy v. Gibson, 8 Wall. 
(U. S.) 498. See reference to this con- 
struction in Robinson v. National 
Bank, 81 N. Y. 385; s. c, 37 Am. Rep. 
508. 

5. Some of the cases hold that the 



15ii 



state Control. 



NA TIONAL BANKS. 



Place of Action, 



Proceeding to Oust Director of Bank. — And it has been held 
that an information in the nature of a quo warranto will not lie 
in a State court to try the right to office of a director in a national 
bank.i 

3. Place of Bringing Action — Conflicting Views. — Not only is it 
the general doctrine that State courts have jurisdiction of suits 
brought by a national bank,^ and that it may be sued in the 
proper courts of the State in which it is located,^ but it is held by 
some of the cases that such a bank can be sued only in the courts 
of the State in which it is established, and not in those"of another 
State.* Furthermore, it is sometimes, at least, indicated that the 
suit in such cases must be brought in the proper court of the 
particular city or county in which the bank is located.* Other 
cases, however, hold that a national bank doing business in one 
State may be sued in the courts of other States,® and even in a 
•county of the same State different from that in which the bank is 
located.'^ Indeed, a national bank has been regarded as being a 
foreign corporation even in the State in which it is located, within 
the meaning of a statute requiring security for costs.* 



provision in question is permissive, not 
mandatory. See full statement of 
grounds for this construction in Cooke 
V. State Nat. Bank, 52 N. Y. 96; s. c, 
II Am. Rep. 667; s. c, i Nat. Bank Cas. 
■69S. Consult furtl^r Talmage v. Third 
Nat. Bank, 91 N. Y. 531; s. c, j.Am. & 
Eng. Corp. Cas. 148. According to 
this view the provision does not, of 
itself, exclude the jurisdiction of other 
State courts. See Robinson v. National 
Bank, 81 N. Y. 385; s. c, 37 Am. Rep. 
508, citing Claflin v. Houseman, 93 
U. S. 130; I Kent's Com. 395, 396; Bank 
of United States v. Deveaux, 5 Cranch 
(U. S.) 85; Osborn v. United States 
Bank, 9 Wheat. (U. S.) 738; Teall v. 
Felton, I N. Y. 537, and Houston v. 
Moon, 5 Wheat. {U. S.) l. The per- 
tinency of most of these citations has 
already been considere^d. According to 
the other view the provision is not per- 
missive in any such senpe as to allow a 
national bank, established in one State, 
to be sued in the courts of any State of 
the Union in which litigation against 
an extra-State corporation is author- 
ized, and in which it might be effect- 
ually served with process. Crocker v. 
Marine Nat. Bank, loi Mass. 240; s. c, 
3 Am. Rep. 336. See, to same effect, 
Cadle W.Tracy, 11 Blatchf. (U.S.) loi; 
s. c, I Nat. Bank Cas. 230. 

1. State V. Curtis, 35 Conn. 374, 382. 

2. First Nat. Bank v. Hubbard, 49 
Vt. I ; s. c, 24 Am. Rep. 97; s. c, i Nat. 
Bank Cas. 912. See also Ordway v. 



Central Nat. Bank, 47 Md. 217; s. c, 28 
Am. Rep. 455; s. c, i Nat. BanTc Cas. 

559- 

3. Adams v. Daunis, 29 La. An. 315; 
s. c, I Nat Bank Cas. 510; Bank of 
Bethel -o. Pahquioque Bank, 14 Wall. 
(U. S.) 383; s. c, I Nat. Bank Cas. 77. 

4. See Crocker v. Marine Nat. Bank, 
loi Mass. 240; s. c, I Nat. Bank Cas. 
575; s. c, 3 Am. Rep. 336. Consult 
also Cadle v. Tracey, 11 Blatch. (U. S.) 
loi; s. c, I Nat. Bank Cas. 230. 

5. See Crocker v. Marine Nat. Bank, 
loi Mass. 240; s. c, I Nat. Bank Cas. 
575; s. c, 3 Am. Rep. 336. See also, as 
to jurisdiction over receiver, Adams 
V. Daunis, 29 La. An. 315; s. c, i Nat. 
Bank Cas. 510. But compare New 
Orleans Banking Assoc, v. Adams, 3 
Woods (U. S.) 21; s. c, 2 Nat. Bank 
Cas. 207. The doctrine of the text is 
inapplicable to a change of the place of 
trial. "Kinser v. Farmers' Nat. Bank, 
58 Iowa 728. 

6. Cooke V. State Nat. Bank, 52 N. 
Y. g6; s. c, 11 Am. Rep. 667; s. c, i 
Nat. Bank Cas. 698; Robinson v. Na- 
tional Bank, Si N. Y. 385; s. c, 2 Nat. 
Bank Cas. 319; s. c, 37 Am. Rep. 508; 
Holmes v. Nat. Bank, 18 S. Car. 
31; s. c, 44 Am. Rep. 558. 

7. Talmage v. Third Nat. Bank, 91 
N. Y. 531; s. c, I Am. & Eng. Corp. 
Cas. 148. 

8. National Park Bank v. Gunst, i 
Abb. N. Cas. (N. Y.) 292; s. c, i Nat. 
Bank Cas. 797. 



153 



state Control. NA TIONAL BANKS. Attachment. 

Distinction Between Local and Transitory Actions. — The Supreme 
Court of the United States does not adopt either view, but applies 
to this matter the old distinction between local and transitory 
actions. It holds that a national bank can be sued in a State 
court in a local action, in contradistinction from one of a transi- 
tory character, in a county or city other than that where the bank 
is located.^ 

4. Attachment Against National Bank in Another State — Conflict 
of Decisions. — There has been considerable conflict in the 
decisions upon the question whether an attachment may ordi- 
narily issue out of a State court against the property of a national 
bank which is located in another State. 

Ruling by United States Supreme Court. — This conflict may, 
however, doubtless be regarded as set at rest by a recent decision 
of the United States Supreme Court, based iJpon a full consider- 
ation of- the provisions on the subject and the amendments 
thereof. This decision comprehensively holds that the effect of 
the act of congress is to deny altogether the remedy by attach- 
ment so far as national banks are concerned, whether in federal 
courts or in those of the States, without restriction to cases of 
actual or contemplated insolvency,* and the view thus taken has 
been followed as obligatory by the New York supreme court.* 

5. Suits for Recovery of Interest Penalties. — The decisions of the 
different State courts are not entirely uniform upgn the question, 
whether or not such courts have jurisdiction of actions against 

1. Casey v. Adams, 102 U. S. 66; s. c, v. First Nat. Bank, 7 Hun (N. Y.) 96; 
a Nat. Bank Cas. 102. But this view is s. c, i Nat. Bank Cas. 7S9. 
regarded by the Supreme Court of Geor- 3. Bank of Montreal v. Fidelity Nat. 
gia as an unwarranted construction of Bank, 1 N. Y. Supp. 852, and First Nat. 
the pertinent provisions of the National Bank v. La Due, 39 Minn. 415. A 
Bank act in Continental Nat. Bank v. different position had been taken in 
Folsom, 78 Ga. 449; s. c, 3 Nat. Bank Robinson v. National Bank, 19 Hun 
Cas. 350, which holds that a national (N. Y.) 477; s. c, Si N. Y. 385, or 37 
bank giving an attachment bond in one Am. Re]). 508, or 2 Nat. Bank Cas. 319, 
State may be sued thereon in that followed in National Shoe etc. Bank v. 
State, though located in another State; Mechanics' Nat. Bank, 89 N. Y. 467, 
and the decision under due consideration s. c, 3 Nat. Bank Cas. 601; and Peo- 
has been distinguished by the New pies' Bank v. Mechanics' Nat. Bank,, 
York court of appeals upon the ground 62 How. Pr. (N. Y.) 422, disapprov- 
that the question there was a-local ques- ing Central Nat. Bank v. Richland 
tion, and the plea was to the jurisdic- Nat. Bank, 52 How. Pr. (N. Y.) 136; 
tion, and that the effect of the statute s. c, i Nat. Bank Cas. 801, and Rhoner 
on transitory actions was not e,x- v. First Nat. Bank, 14 Hun (N. Y.) 
pounded. Talmage w. Thii-d Nat. Bank, 126; s. c, 2 Nat. Bank Cas. 331. And 
91 N. Y. 531; s. c, 1 Am. & Eng. Corp. this view had been adopted in Holmes 
Cas. 148. V. National Bank, 18 S. Car. 31; s. c, 

2. Butler t'. Coleman, 124 U. S. 721. 44 Am. Rep. 558. It was not considered 
For a previous ruling adverse to the necessary to decide the question in Mc- 
vahdity of an attachment against the Cracken v. Covington City Nat. Bank^ 
property and credits of an extra-State 4 Fed. Rep. 602. Concerning the pro- 
national bank, see Chesapeake Bank liibition of attachment against national 
V. First Nat. Bank, 40 Md. 269; s. c, i banks which are insolvent or on the eve 
Nat. Bank Cas._53i; s. c, 17 Am. Rep. of insolvency, see National Shoe etc. 
601. But comjiare contra, Southwick Bank v. Mechanics' Nat. Bank, 89 N. 

154 



Kational Control. 



NATIONAL BANKS. 



In General. 



national banks for penalties and forfeitures, prescribed by the 
act of congress for exacting and receiving usurious interest.^ 
Various cases may be found which are either directly or indirectly 
adverse to the existence of such jurisdiction.* The decided 
weight of the more recent decisions, however, seems to be in 
favor of sustaining such jurisdiction, especially where the actions 
are by private persons for the recovery of the penalty of twice 
the amount of interest prescribed by the congressional statute.* 

III. National Contkol — 1. In General — Scope of. — It has been 
well said of the national banks organized under the act of con- 
gress, that they are instruments designed to be used to aid the 
government in the administration of an important branch of the 
public service ; that they are means appropriate to that end ; that 
congress is the sole judge of the necessity which existed for cre- 
ating them ; and that being such means the States can exercise no 
control over them, nor in any wise affect their operation, except so 
far as congress may see proper to permit.* 

Supervision by National Officers. — The national banks are located 
in different parts of the United States, most of them at a great 
distance from the city of Washington and from each other, and 
all under the supervision of ofificers residing in that city.^ 



Y. 467; Raynor v. Pacific Nat. Bank, 
93 N. Y. 371. 

1. Lynch v. Merchants' Nat. Bank, 
22 W.Va. 554; s. c, 46 Am. Rep. 520. 

2. See Newell v. National Bank, 12 
Bush (Ky.) 57; s. c, i Nat. Bank Cas. 
501; Missouri R. Tel. Co. v. First Nat. 
Bank, 74 111. 2 17; s. c, i Nat. Bank Cas. 
401. Compare also State v. Puller, 34 
Conn. 2S0; s. I,., I Nat. Bank Cas. 375. 

3. Lynch v. Merchants' Nat. Bank, 
22 W. Va. 554; s. I,., 46 Am. Rep. 520. 
See the following cases supporting this 
view: First Nat. Bank -y. Overman, 22 
Neb. 116; s. c, 3 Nat. Bank Cas. 556; 
Schuyler Nat. Bank v. BoUong, 24 Neb. 
821; s. c, 3 Nat. Bank Cas. 558; Bletz v. 
Columbia Nat. Bank, 87 Pa. St. 87 ; s. c, 
2 Nat. Bank Cas. 366; s. c, 30 Am. 
Rep. 343. Followed in Gruber v. First 
Nat. Bank, 87 Pa. St. 465; s. c, 2 Nat. 
Bank Cas. 395; Pitckett v. Merchants' 
Nat. Bank, 32 Ark. 346; s. c, 2 Nat. 
Bank Cas. 209; Hade v. McVay, 31 
Ohio St. 231; s. c, 2 Nat. Bank Cas. 353; 
Dow V. Irasburgh Nat. Bank, 50 Vt. 
112; s. c, 28 Am. Rep. 493; s. c, 2 Nat. 
Bank Cas 421; Ordway v. Central Nat. 
Bank, 47 Md. 217; s. c, 28 Am. Rep. 
455; s. c, I Nat. Bank Cas. 559. 

Waiver of Exemption. — The statutor3- 
exemption of national banks from suits 
in State courts, in counties other than 
those in which the association is located. 



is a personal privilege which is waived 
by appearing and making defence with- 
out claiming the immunity granted by 
congress. Charlotte Nat. Bank v. Mor- 
gan, 132 U. S. 141. 

4. Farmers' etc. Nat. Bank v. Dear- 
ing, 91 U. S. 29; s. c, I Nat. Bank 
Cas. 117. See also as to regulation of 
currency by congress, Veazie Bank v. 
Fenno, 8 Wall. (U. S.) 533; s. c, i 
Nat. Bank Cas. 22. 

A State statute prohibiting the es- 
tablishment of banking companies 
without authority of the legislature does 
not apply to banking corporations like 
national banks, created by authority of 
congress. Stetson v. Bangor, 56 Me. 
274; s. c, I Nat. Bank Cas. 520, 521, 
concerning right to sue in federal 
courts; First Nat. Bank v. Douglass 
Co., 3 Dill. (U. S.) 298; s. c, I Nat. 
Bank Cas. 267; Foss v. First Nat. Bank, 
3 Fed. Rep. 185; s. c, 2 Nat. Bank 
Cas. 104; Fifth Nat. Bank v. Pitts- 
burgh etc. R. Co., I Fed. Rep. 190; 
». c, 2 Nat. Bank Cas. 190. But 
compare St. Louis Nat. Bank v. Brink- 
man, I Fed. Rep. 45; s. c, 2 Nat. Bank 
Cas. 141. 

5. Piatt t'. Beebe, 57 N. Y. 339; s. c, 
I Nat. Bank Cas. 725. 

Comptroller of the Currency. — Chief 
among these officers is the comptroller 
of the currency who, for the purpose of 



ITational Control. 



NATIONAL BANKS. 



Jurisdiction. 



2. Jurisdiction of Federal Courts — Concurrent Jurisdiction Taken 
Away by Act of 1882. — After the act of 1882, to enable national 
banks to continue their corporate existence, took effect, the con. 
current jurisdiction of the federal courts over suits by and against 
national banks, as such, was taken away, and a suit by or against 
a national bank could not be removed from a State court to a 
circuit court of the United States,^ unless a similar suit by or 
against a State bank in like situation with the national bank could 
be so removed.* 



protecting the public, particularly those 
confiding in the solvency of the banks 
and having business with them, is un- 
der the necessity of taking the manage- 
ment from such of them as fail to com- 
ply vifith the law, and confiding them to 
the care of a receiver. Piatt v. Beebe, 
just cited. Consult, further, concerning 
suspended national banks, National 
Bank v. Mechanics' Nat. Bank, 94 U. 
S. 437; s. c, I Nat. Bank Cas. 133; 
Chemical Nat. Bank v. Bailey, 12 
Blatchf. (U. S.) 480; s. u., I Nat. Bank 
Cas. 260. 

National Bank Examiner. — A national 
bank examiner, however, is not an of- 
ficer or agent of the bank, but of the 
government, and has no authority, as 
such examiner, to act for the bank in 
any binding manner. Witters w. Sowles, 
32 Fed. Rep. 762. , 

Internal Revenue Officers. — The law 
under which national banks are incor- 
porated does not exempt them from ex- 
amination bj' internal revenue officers. 
United States v. Rhawn, 11 Phila. (Pa.) 
521; s. c, I Nat. Bank Cas. 358. See 
also United States v. Mann, 95 U. S. 
580; s. c, I Nat. Bank Cas. 154. 

United States Treasurer. — Concern- 
ing disposition of redemption fund by 
United States Treasurer, see Jackson v. 
United States, 20 Ct. of CI. 298. 

Jurisdictional Questions Concerning 
Such Ofacers. — As to want of jurisdic- 
tion of United States circuit court to 
entertain suit in control of comptroller 
and treasurer, as to bonds deposited 
with latter, see Van Antwerp v. Hub- 
bard, 7 Blatchf. (U. S.) 426; s. u., I Nat. 
Bank Cas. 208, relying, as to power of 
Circuit courts over United States of- 
ficers, vipon Kendall v. United States, 
12 Pet. (U. S.) 524, and following cases 
therein cited: Marbury v. Madison, i 
Cranch (U. S.) 137; Mclntire v. Wood, 
7 Cranch (U. S.) 504; M'Clung v. 
Silliman, 6 Wheat. (U. S.) 598; Reeside 
V. Walker, 11 How. (U. S.)'272; United 
States V. Guthrie, 17 How. (U. S.) 284; 



156 



and United States v. Edmunds, 5 Wall. 
(U. S.) 563. See also reference to same 
view in Van Antwerp v. Hubbard, 8 
Blatchf. (U. S.) 283; s. c, i Nat. Bank 
Cas. 219. 

Receiver of suspended national bank 
cannot subject the government to the 
jurisdiction of the courts, nor can comp- 
troller do so to determine the conflict- 
ing claims of the United States and 
other creditors. Case v. Terrell, 11 
Wall. (U. S.) 99. But receiver is an 
oiEcer of the United States so as to 
give the federal court jurisdiction of an 
action at common law brought by him 
to collect a claim which was due to the 
bank at the time of his appointment. 
Piatt V. Beech, 2 Ben. (U. S.) 303; s. c, 

1 Nat. Bank Cas. 182. 

1. As to when removal justifiable 
and in time, see Davies v. Marine Nat. 
Bank, 24 Fed. Rep. 194, 195; Richards 
V. Rock Rapids, 31 Fed. Rep. 505. 

2. Leather Manufacturers' Bank v. 
Cooper, 120 U. S. 778; s. c, 3 Nat. 
Bank Cas. 208. 

Prior to that act it was held by in- 
ferior federal courts that a bank organ- 
ized under the national banking law 
is not authorized to sue outside of the 
district in which it is located, in a cir- 
cuit court of the United States, inde- 
pendently of any question of citizen- 
ship. St. Louis Nat. Bank v. Allen, 2 
McCrary (U. S.) 92. Or when the 
amount in controversy does not ex- 
ceed $500. St. Louis Nat. Bank v. 
Brinkham, i McCrary (U. S.) 9; s. i;., 

2 Nat. Bank Cas. 141. 

But on the other hand it was held by 
a court of like character that national 
banks may, by reason of their character 
as such, sue in the federal courts, in 
First Nat. Bank v. Douglas Co., 3 Dill. 
(U. S.) 330; s. c, I Nat. Bank Cas. 267. 
See also White v. Com. Nat. Bank, 4 
Brewst. (Pa.) 234; First Nat. Bank v. 
Bohne, 8 Fed. Rep. 115; Foss v. First 
Nat. Bank, 3 Fed. Rep. 185; s. c.,2 Nat. 
Bank Cas. 104; and by the Supreme 



National Control. 



NATIONAL BANKS. Comptroller of Currency. 



Nor could a national bank, 'after such act, sue in the federal 
courts in virtue of a mere corporate right, nor unless, as in the 
case of other banks and citizens, the subject-matter of litigation 
involved some other element of federal jurisdiction.^ 

But the provisions of the act are inapplicable to an action 
brought against private persons by a receiver of a national bank.^ 

Effect of Act of 1888. — Nor is jurisdiction of the federal courts 
over suits to which national banks are a party so far taken away 
by the act of 1888 as to deprive such courts of jurisdiction of an 
action between a national bank located in one State and a citizen 
of another State, because the provision of the act making such 
banks, for purposes of litigation, citizens of the States in which 
they are located, is followed by a provision that the circuit and 
district courts of the United States shall not have in such cases 
"jurisdiction over them, except such as they would have in cases 
between individual citizens of the same State."* 

3. Functions of Comptroller of Currency — In General. — The comp- 
troller of the currency has certain supervisory powers and duties 
in relation to national banks, designed to keep the officers within 
the limits of the law, in conducting their legitimate business, 
and, as far as lies within the province of official supervision by 
the government, to protect the creditors and stockholders 
against fraud, negligence and mismanagement.* Among the 
functions of the comptroller of the currency are the filling of 



Court of the United States that the cir- 
cuit courts hiad jurisdiction of suits 
brought by or against national banks 
(in the district of their location) with- 
out regard to the citizenship of the 
parties. Kennedy v. Gibson, 8 Wall. 
(U. S.) 498; s. c, I Nat. Bank Cas. 17; 
Wilson Co. V. National Bank, 103 U. 
S. 770. See also Mitchell v. Butler, 25 
Int. Rev. Rec. 185; s. c, 8 Reporter 
232; s. c. (apparently), as Mitchell v. 
Walker, 25 Int. Rev. Rec. 64, or 2 Nat. 
Bank Cas. 180. * 

The fact that one of the parties to a 
suit is a national bank vsras held to be 
no ground for removal from a State to 
a federal court, in Wilder v. Union Nat. 
Bank, 9 Biss. (U. S.) 178; s. c, 2 Nat. 
Bank Cas. 124, discussing requisites to 
authorize a removal on the ground that 
the controversy involves a question 
arising under the constitution and laws 
of the United States. 

The National Bank act and not the 
Judiciary act was held to control the 
power and right of national banks to 
sue in the federal courts in the dis- 
trict of their location, in Commer- 
cial Nat. Bank -v. Simmons, i Flip. 
(U. S.) 449; s. u., I Nat. Bank Cas. 
294. 



1. Union Nat. Bank v. Miller, 15 Fed. 
K-ep. 703, 704. 

Against right of a national bank to 
institute and maintain a suit against 
residents of its own State and judicial 
district, since act of 1S82, see National 
Bank v. Fore, 25 Fed. Rep. 209. 

2. Price V. Abbott, 17 Fed. Rep. 506. 

3. First Nat. Bank v. Forrest, 40 Fed. 
Rep. 705, objecting to the literal con- 
struction that would make one clause 
nullify the other, and holding the design 
of the qualifying clause to be that the 
federal courts should have no other or 
different jurisdiction, where the suits 
concerned national banks, than they 
would have in case the suits were pend- 
ing between individual citizens. 

JuTisdiction of United States Supreme 
Court. — The Supreme Court of the 
United States has jurisdiction to re- 
examine the judgment of a State court 
involving the right of a national bank 
to purchase a promissory note secured 
by a deed of trust upon real estate; but 
a motion to affirm will be granted where 
that is the only federal question in the 
case and the decision below is in recog- 
nition of the right. Swope v. Leffing- 
well, 105 U. S. 3. 

4. Branch v. United States, 12 Ct. 



157 



National Control. NA TIONAL BANKS. Comptroller of Currency. 

requisitions for currency from States and Territories,* and the 
issuance of a certificate of approval of the increase of the capital 
stock of a national bank.** 

Power to Enforce Stockholder s Liability. — It has been repeat- 
edly decided that the comptroller of the currency is vested with 
authority to determine the extent to which the individual liability 
of stockholders is to be enforced.^ The conclusive character of 
this authority is upheld by some of the decisions ;* but it is appar- 
ently denied by others, which hold that the authority is not made 
exclusive in character, particularly in view of supplementary legis- 
lation by congress on the subject. ^ 

Should the comptroller, however, attempt to enforce an assess- 
ment clearly and palpably contrary to the provisions of the na- 
tional bank act, a court of equity, if its aid were invoked, would 
promptly restrain him by injunction.® 

The comptroller of the currency has also no power to discon- 
tinue a suit against a stockholder to enforce his individual liability 
for the debts of a national bank, though the comptroller might, 
perhaps, direct the receiver of the bank to make such discontinu- 
ance.''' 

Comptroller s Certificate of Organization. — Under the construc- 
tion generally given to the provisions of the national bank act con- 
cerning the comptroller's certifice of organization,* the comptroller 
is clothed with jurisdiction to decide as to the completeness of the 
organization of a national bank, and his certificate is conclusive 
upon the subject for all the purposes of a litigation to enforce the 
individual liability of a stockholder for the debts of the associa- 
tion ;^ and so the production of such certificate has been regarded 

of CI. 281; s. c, I Nat. Bank Cas. 628. Consult also National Bank v. 

363. Kennedy, 17 Wall. (U. S.) 19; s. c, i 

1. As to priority permitted among Nat. Bank Cas. 87; Bowden v. Morris, 
requisitions arriving at about the same i Hughes (U. S.) 378. 

time, see Nat. Banks, 14 Op. Atty. Gen. 4. Kennedy v. Gibson, 8 Wall. (U. 

4ir(., 417. S.) 498; o. c, : Nat. Bank Cas. 17, fol- 

2. National Bank act, § 13; 13 U. S. lowed in Strong v. Southworth, 8 
Stat, at Large 99. 103. See Keyser v. Ben. (U. S.) 331; Bailej' v. Sawyer, 4 
Hitz, below, 2 Mackey (D. C.) 473; or Dill. (U. S.} 463; s. c., i Nat. Bank Cas. 
3 Nat. Bank Cas. 340. Concerning tax- 156; Casey v. Galli, 94 U. S. 673, 677; 
ation of new shares upon which a divi- s. c, i Nat. Bank Cas. 142. See also 
dend was declared as of a date prior to Sanger -v. Upton, 91 U. S. 56; Ger- 
such approval and certificate, see mania Nat. Bank v. Case, 99 tj. S. 628. 
Charleston v. People's Nat. Bank, 5 S. 5. Richmond v. Irons, 121 U. S. 27; 
Car. 103; s. c, 22 Am. Rep. i; s. c, i s. c, 17 Am. & Eng. Corp. Cas. 71; 
Nat. Bank Cas. 898, 901. Irons v. Manufacturers' Nat. Bank, 6 

3. Stanton w. Wilkeson, 8 Ben. (U. S.) Biss. (U. S.) 301. See also Hawey v. 
357. See to such effect. Kenned}' v. Gib- Lord, 11 Biss. (U. S.) 144; s. c, 10 Fed. 
s6n,8 Wall. (U.S.)498;s.c., iNatBank Rep. 236. 

Cas. 17; Sanger w. Upton, 91 U. S. 56; 6. United States f.Knox,io2 U.S. 422. 

Strong V. Southworth, 8 Ben. (U. S.) 7. Case v. Small, 4 Woods (U. S.) 78; 

331; Bailey f. Sanger, 4 Dill. (U. S.) 463; s. c, 10 Fed. Rep. 722. 

s.c, I Nat. Bank Cas. 356; Casey w.Galli, 8. National Bank act, §§ 18,44; '3 

94 U. S. 673; s.c, I Nat. Bank Cas. 142; U. S. Stat, at Large loi, 113. 

Germania Nat. Bank v. Case, 99 U. S. 9. Casey v. Galli, 94 U. S. 673, rely- 

158 



Kktional Contarol. NA TIONAL BANKS. ComptroUer of Currency. 

as sufficiently proving the incorporation of the bank,^ and as con- 
clusive in regard to the regularity of the proceedings by which 
any bank his been converted into a national bank.* Some cases, 
however, seem to go no further than to hold that the comptroller's 
certificate is competent evidence, which may aid in making out a 
prima facie case.* 

Comptroller s Appointment of Receiver. — The action of the 
comptroller of the currency in making the appointment of a receiver 
is conclusive upon debtors* until set aside on the application of 
the bank;" and a certificate of the comptroller, approved and 
concurred in by the secretary of the treasury, and reciting the 
existence of the facts of which the former is required to' be satis- 
fied under the national bank act,^ is sufficient evidence of the va- 
lidity of the appointment of the receiver in an action brought by 
him as such.'' 

Comptroller s Relation to Bank in Liquidation. — Under the con- 
struction given to provisions of the original national bank act, in 
regard to the receiver's action under the direction of the comp- 
troller, in assuming charge of national banks under certain circum- 
stances, and enforcing the liability of stockholders, etc., the 
receiver is the instrument of the comptroller by whom he is 
appointed, and it is therefore considered to be for the comptroller 
to decide when it is necessary to institute proceedings against the 
stockholders to enforce their personal liability, and to determine 
how much, if only a part, shall be collected.^ 

Comptroller s Suit for Dissolution of Bank. — A forfeiture of the 
rights and privileges of a national banking association must be de- 
termined and adjudged in a suit instituted by the comptroller of 

ing, concerning conclusiveness of certifi- 7. Piatt v. Beebe, 57 N. Y. 339, tak- 

cate, uponThacher v. West River Bank, ing the position that there is nothing in 

19 Mich. ig6. the act to indicate a design that the ap- 

1. National Bank T. Phoenix Ware- poiritment should be upon legal proof 
housing Co., 6 Hun (N. Y.) 71, citing- or evidence of the facts as to violation 
also as to estoppel bj dealing with the of the law in the management of the 
bank as a corporation, Palmer v. Law- bank, but that the act is framed to meet 
rence, 3 Sandf. (N. Y.) 161; Steam Nav. the emergency of want 01 time to get 
Co. V. Weed, 17 Barb. (N. Y.) 378; legal evidence of this character. 
White V. Coventry, 29 Barb. (N. Y.) 8. Kennedy w. Gibson, S Wall. (U. S.) 
305; and White v. Ross, 15 Abb. Pr. 498; s. c, i Nat. Bank Cas. 17, con- 
(N. Y.) 661. struing act of June 3rd, 1S64, § 50, 

2. Keyser v. Hitz, 2 Mackey (D. C.) quoted in Sanger v. Upton, 91 U. S. 56, 
473; s. c, 3. Nat. Bank Cas. 340. and as authoritative in Strong v. South- 

3. Mix V. National Bank, 91 111. 20; worth, 8 Ben. (U. S.) 331, followed in 
s. c, 33 Am. Rep. 44. See also Tapley Bailey v. Sawyer, 4 Dill. (U. S.) 463; 
V. Martin, 116 Mass. 275; s. c, i Nat. s. c, i Nat. Bank Cas. 356, and in Ca- 
BankCas. 611. se3' w. Galli, 94 U. S. 673; s. c, i Nat. 

4. See Piatt v. Crawford, 8 Abb. Pr., Bank Cas. 142; treated as stating estab- 
N. S. (N. Y.) 297, 305-6. lished doctrine in Germania Nat. Bank 

5. Cadle V. Baker, 20 Wall. (U. S.) v. Case, 99 U. S, 628; distinguished in 
650, holding that the bank and not the Bank v. Kennedy, 17 Wall. (U. S.) 922; 
debtor may move in that behalf. s. c, I Nat. Bank Cas. 87, and in Bow- 

6. National Bank act, § 50; 13 U. S. den v. Morris, i Hughes (U. S.) 378. 
Stat, at Large 99. Compare Irons v. Manufacturers' Nat. 

159 



Powers. 



NA TIONAL BANKS. General and Incidental. 



the currency in his own name ;* and such an association must stand 
until dissolved in that way.^ Nor can any person, by a conspiracy 
to evade its regulations, escape the liability for borrowed money, 
loaned by a bank whose forfeiture has not been determined, upon 
personal security, in the manner authorized.^ 

IV. POWEBS — 1. General and Incidental Powers— /V«7ww2o« C"^;«ff?'«- 
ing. — As from the date of its organization certificate, a national 
banking association becomes a body corporate.* As such it has 
power to adopt and use a corporate seal, to have succession for 
the period of twenty years, unless sooner dissolved or suffering 
forfeiture of its franchise ; to make contracts, to sue and be sued,^ 
to elect or appoint directors, and by its board of directors to ap- 
point a president and other officers ; and to exercise all such inci- 
dental powers as shall be necessary to carry on the business of 
banking, by discounting and negotiating promissory notes, drafts,, 
bills of exchange, and other evidences of debt,® by buying and 



Bank, 6 Biss. (U. S.) 301; and see as to 
supplementary enactment concerning 
involuntary liquidation by act of June 
30th, 1876 (19 U. S. Stat, at Large 63; 
supplement to Rev. Stat. 216). See 
Richmond v. Irons, 121 U. S. 27; s. i_., 
17 Am. & Eng. Corp. Cas. 71; Hawej 
V. Lord, II Biss. (U. S.) 144; s. c, 10 
Fed. Rep. 236. 

1. National Bank act, § 53; 13 U. S. 
Stat, at Large 99. 

2. Union Gold Min. Co. v. Rocky 
Mountain Nat. Bank, 1 Colo. 531. 

3. Stephens v. Monongahela Nat. 
Bank, 88 Pa. St. 157; s. c, 32 Am. Rep. 
438; s. c, 2 Nat. Bank Cas. 39S. 
But a decree of forfeiture at the in- 
stance of the comptroller abates a suit 
against a national bank to enforce the 
collection of a demand. First Nat. 
Bank v. Colby, 21 Wall. (U. S.) 609, 
614. 

4. U. S. Rev. Stat, § 5, 36. 

5. See Main v. Second Nat. Bank, 6 
Biss. (U. S.) 26; s. c, I Nat. Bank Cas. 
200. 

6. This clause (which is also liberally 
construed in Shinkle v. First Nat. 
Bank, 22 Ohio St. 517; s. c, i Nat. 
Bank Cas. 824) does not exclude au- 
thority to guaranty the pa^'inent of a 
note at maturity. Peoples' Bank v. 
National Bank, loi U. S. 181; s. c, 2 
Nat. Bank Cas. 97. But a national 
bank has no power to guaranty a con- 
tract between other persons for the de- 
livery of building materials. Norton 
V. Derry Nat. Bank, 61 N. H. 509; s. c, 
60 Am. Rep. 334; s. c, 3 Nat. Bank 
Cas. 568. As to right to take railway aid 
coupons, see Town of Lyons v. Lyons 



Nat. Bank, 19 Blatchf. (U. S.) 279; 
First Nat. Bank v. Town of Benning- 
ton, 16 Blatchf. (U. S.) 53; s. c, 2 Nat. 
Bank Cas. 437. 

"To receive deposits is among the 
powers specifically delegated to na- 
tional banks." Eastern Townships' 
Bank v. Vermont Nat. Bank, 22 
Blatchf (U. S.) 498; s. c, 22 Fed. Rep. 
186. 

Special Deposits. — It seems now to be 
settled that a national bank may receive 
special deposits. National Bank v. 
Graham, 100 U. S. 699; s. c, 2 Nat. 
Bank Cas. 64. 

But there was formerly much con- 
flict in the decisions as to whether this 
clause, or perhaps any other provision 
of the National Bank act, conferred 
such authority. The view adverse to 
the existence of such authority was 
sustained mainly by Whitney v. First 
Nat. Bank, 50 Vt. 388; s. c, 28 Am. 
Rep. 503, and Wiley v. First Nat. Bank, 
47 Vt. 546; s. c, 19 Am. Rep. 122; s. c, 
I Nat. Bank Cas. 905. Support to the 
same position is given by First Nat. 
Bank v. Ocean Nat. Bank, 60 N. Y. 
278; s. c, 19 Am. Rep. iSi; s. c, i Nat. 
Bank Cas. 728, and Third Nat. Bank v 
Boyd, 47 Md.47; s. c, 22 Am. Rep. 35; 
s. c, I Nat. Bank Cas. 445. See also 
Weckler v. First Nat. IBank, 42 Md. 
581; s. c, I Nat. Bank Cas. 541;. The 
contrary view upholding the authority 
to take special deposits was sustained 
by Pattison xi. Syracuse Nat. Bank, 80 
N. Y. 82; s. c, 36 Am. Rep. 582. The 
question was waived in De Haven -v. 
Kensington Nat. Bank, 81 Pa. St. 95; 
s. c, I Nat. Bank Cas. 882. 



160 



Powers. 



NA TIONAL BANKS. General and Incidental. ' 



selling exchange, coin,^ 

Other authorities bearing upon same 
phase of the subject are reviewed in the 
above cited case of Whitney v. First Nat. 
Bank, 50 Vt. 3S8; s. i;., 28 Am. Rep. 
503, viftiich case is reported on other 
points in 55 Vt. 154; s. c, 3 Am. & 
Eng. Corp. Cas. 266, and the judgment 
wherein is reversed in i Morr. Trans. 
263, upon the authority of the before 
cited case of First Nat. Bank v. Gra- 
ham, 100 U. S. 699; s. I,., 2 Nat. Bank 
Cas. 64. These reviewed autiiorities 
comprise Fowler v. Scully, 72 Pa. St. 
456; s. c, 14 Am. Rep. 699; s. c, i Nat. 
Bank Cas. S54; First Bank v. Graham, 
79 Pa. St. 106; s. c, 21 Am. Rep. 49; 
s. c, I Nat. Bank Cas. 875; Foster v. 
Essex Bank, 17 Mass. 479; s. c, 9 Am. 
Dec. 168; Coffey v. National Bank, 46 
Mo. 140; s. c, 2 Am. Rep. 4S8; s. c, i 
Nat. Bank Cas. 644; Leach v. Hale, 31 
Iowa 69; s. c, 7 Am. Rep. 112; Scott v. 
National Bank, 72 Pa. St. 471; s. c, 13 
Am. Rep. 711; s.c, i Nat. Bank Cas. 864; 
Chattahoochee Nat. Bank v. Schley, 
58 Ga. 369; s. c, I Nat. Bank Cas. 379; 
Pearce v. Madison etc. R. Co., 21 How. 
(U. S.) 441; Vermont etc. R. Co. v. 
Vermont Cent. R. Co., 34 Vt. 47; Bul- 
lard V. National Eagle Bank, i8 Wall. 
(U. S.) 589; s. c, : Nat. Bank Cas. 93, 
and Head v. Providence Ins. Co., 2 
Cranch (U. S.) 467. Additional cases 
reviewed or noted in Pattison v. Syra- 
cuse Nat. Bank, 80 N. Y. 82; s. c, 36 
Am. Rep. 582. Relevant to the dis- 
cussion of the matter are Llo3'd c. 
West Branch Bank, 15 Pa. St. 172; 
Lancaster Co. Nat. Bank v. Smith, 62 
Pa. St. 47; Turner v. First Nat. Bank, 
26 Iowa 562; s. c, I Nat. Bank Cas. 
154; Smith V. First Nat. Bank, 99 
Mass. 605; s. c, 97 Am. Dec. 59; and 
Giblin v. McMullen, 2 L. R., P. C. 317. 

The doctrine of the Supreme Court 
of the United States, which may be re- 
garded as establishing the law upon 
this subject, is that it would un- 
doubtedly be competent for a national 
bank to receive a special deposit of such 
securities or bonds, "written on a con- 
tract of hiring or without reward," and 
that "it would be liable for a greater or 
less degree of negligence accordingly." 
First Nat. Bank v. Graham, 100 U. S. 
699; s. c, 2 Nat. Bank Cas. 64. This 
proposition is spoken of as "decided," 
in the case just cited, in Mylie v. 
Northampton Bank, 119 U. S. 361; 
s. c, 3 Nat. Bank Cas. 188. And the 
case is also treated as authority upon 



16 C. of L.— II 



the liability of a national bank, in 
Whitney v. Na'tional Bank, i Morr. 
Trans. 263, and cited in regard to the 
scope of such liability in Prather v. 
Kean, 29 Fed. Rep. 498. 

The "proper construction" of the 
National Bank act is said to have been 
"conclusively determined" by this case 
in Bank v. Zent, 39 Ohio St. 105, loS; 
s. c, 3 Nat. Bank Cas. 698, 700. 

The view thus taken is based upon 
the provision of the National Bank 
act, as to delivery of special deposits by 
national banks after they have stopped 
business (U. S. Rev. Stats., § 5228, act 
of 1864, fj 46), which is considered to 
imply clearly and as effectually as by 
virtue of an express declaration (upon 
the authority of United States v. Bab- 
bitt, I Black (U. S.) 55) that a na- 
tional bank may receive such special . 
deposits as a part of its legitimate busi- 
ness. The connected subject of the 
liability of national banks for loss of 
special deposits, to which many of the 
foregoing authorities reallj' relate, is con- 
sidered in Lancaster Co. Nat. Bank v^ 
Smith, 62 Pa. St. 47; Scott v. National 
Bank, 72 Pa. St. 471: s. c, 13 Am. Rep, 
711; s. c, I Nat. Bank Cas. 864; De 
Haven v. Kensington Nat. Bank. 81 
Pa. St. 95; s. i;., I Nat. Bank Cas. 882;, 
First Nat. Bank v. Graham, 85 Pa. SL 
91; s. c, 27 Am. Rep. 628; First Nat, 
Bank v. Rex, 89 Pa. St. 308; s. c, ^^ 
Am. Rep. 767; note to Foster v. Essex 
Bank, 9 Am. Dec. 1S3; Smith r;. First 
Nat. Bank, 99 MaL,s. 605; s. c, 97 Am. 
Dec. 59; Dearborn v. Union Nat. Bank, 
58 Me. 273; s. c, 61 Me. 369; Jenkins v. 
National Village Bank, 58 Me. 275: 
Whitney v. First Nat. Bank, 55 Vt. 
154; s. c, 3 Am. & Eng. Corp." Cas. 
266; Yorkes v. National Bank, 69 N- 
Y. 383; s. c, 25 Am. Rep. 208; Third 
Nat. Bank v. Boyd, 44 Md. 47; s. c, 22 
Am. Rep. 35; s. c, i Nat. Bank Cas.45; 
Leach v. Hale, 31 Iowa 6g; s. c, 7 Am. 
Rep. 112; s. c. I Nat. Bank Cas. 466; 
Coffey V. National Bank, 46 Mo. 140; 
s. c, 2' Am. Rep. 4S8; s. c, i Nat. Bank 
Cas. 644; Second Nat. Bank v. Ocean 
Nat. Bank, 11 Blatchf. (U. S.) 362; 
Prather v. Kean, 29 Fed. Rep. 498^ 
Mylie v. Northampton Bank, 119 U. S. 
361; s. c, 3 Nat. Bank Cas. 188; Bank 
V. Zent, 39 Ohio St. 105, 108; s. c, 3 « 
Nat. Bank Cas. 698. 

1. See Merchants' Bankf. State^ank, 
10 Wall. (U. S.)'6o4; s. c, i Nat. Bank 
Cas. 47. 



161 



Powers. 



NA TIONAL BANKS. 



Prescribing By-laws, 



and bullion ■} by loaning money on personal security,* and by 
issuing, etc., circulating notes.* 

Construction of Provision. — ^The provision as to the incidental 
powers of national banks is sometimes strictly construed as limit- 
ing and defining the kind of banking they may conduct, instead 
of leaving the scope of their business to implication ;■* but a more 
liberal construction is sometimes adopted, which regards the pro- 
vision as containing five distinct grants of power, none of which 
is a limitation upon any other.^ 

Agency in Purchase of Bonds or Stocks. — A national bank has no 
i,nherent power to act as broker or agent in the purchase of bonds 
or stocks, and its president cannot bind it by an agreement so to 
act, without special authority.® 

Seeking to Recover Lost Property — But it certainly would be com- 
petent for a national bank to take measures for the recovery of its 
own property lost through a burglary, and to act for others jointly 
concerned with itself.' 

Collecting Commercial Paper. — The business of collecting com- 
mercial paper is part of the regular business of banking when 
carried on under national as well as under other bank charters.^ 

2. Prescribing By-laws — Authority For. — A national banking 
association is empowered by statute to prescribe, by its board of 
directors, by-laws not inconsistent with law, regulating the manner 



1. Neither this clause nor that con- 
cerning the discounting ot promissory 
notes', etc., authorize the selling of rail- 
road bonds on commission by a na- 
tional bank. Weckler v. First Nat. 
Bank, 42 Md. 581; s. c, 20 Am. Rep. 
95; s. c, I Nat. Bank Cas. 533. Under 
the express authority to buy and sell 
exchange, a national bank may lawfully 
purchase a draft drawn in its favor by a 
seller of goods upon a buyer, with a 
bill of lading attached. Union Nat. 
Bank v. Rowan, 23 S. Car. 339; s. c, 
55 Am. Rep. 26. 

As to right to take railway aid cou- 
pons, see Town of Lyons v.- Lyons 
Nat. Bank, ig Blatchf. (U. S.) 79, 2S9. 

2. This clause does not exclude the 
power of national banks to take a 
pledge of stock as collateral security 
for notes or bills of exchange cashed 
b}' them. Shoemaker w. National Me- 
chanics' Bank, 2 Abb. (U. S.) 416; s. c, 
I Hugjhes (U. S.) loi (quoting, as to re - 
sitrictions upon powers of banks and 
corporations in general, the doctrine of 
Bank of United States v. Dandridge, 
12 Wheat. (U. S.) 68, from Head v. 
Provfdence Ins. Co.„ 2 Cranch (U. 
S.) 127; Steam Nav. Co. xk Dan- 
dridge, 8 Gill & J. (Md.) 318, 319). 



See also Lockwood v. Mechanics' Nat. 
Bank, 9 R. L 308; s. c, 11 Am. Rep. 
253; s. c, I Nat. Bank Cas. 895. ISfor 
does it preclude a national bank from 
making a loan on a note and taking a 
warehouse receipt as collateral security 
therefor. Cleveland v. Shoeman, 40 
Ohio St. 176; s. c, I Am. & Eng. Corp. 
Cas. 140; s. c, 3 Nat. Bank Cas. 701. 

3. Nat. Bank act of June 3rd, 1864, § 
8; 13 Stats, at Large loi; U. S. Rev, 
Stats., § 5136. 

4. Weckier v. First Nat. Bank, 42 
Md. 581; s. c, 20 Am. Rep. 95; s. c, i 
Nat. Bank Cas. 533. 

5. Shoemaker v. National Mechan- 
ic's Bank, 2 Abb. (U. S.) 416; s. c, i 
Hughes (U. S.) loi. 

6. First Nat. Bank v. Hoch, 89 Pa. 
St. 324; s. c, 33 Am. Rep. 769; s. c, 2 
Nat. Bank Cas. 375. 

7. My lie -y. Northampton Nat. Bank, 
119 U.S. 361; s. c, 3 Nat. Bank Cas. 
188. 

8. Mound City Paint etc. Co. v. 
Commercial Nat. Bank, 4 Utah 353. 
This would appear to be assumed in 
Exchange Nat. Bank v. Third Nat. 
Bank, 112 U- S. 276, et seq., and in 
Merchants' Nat. Bank v. Goodman, 
109 Pa. St. 422. 



162 



Powers. 



NATIONAL BANKS. Prescribing By-laws 



in which its stock shall be transferred,^ its directors elected and 
appointed, its officers appointed, its property transferred, its 
general business conducted, and the privileges granted to it by 
law exercised and enjoyed.^ 

Adoption of By-law by Quorum of Board. — A by-law of a national 
bank must, as a prerequisite to its validity, be adopted by a "ma- 
jority of all the directors, or by a quorum of the board ;^ and, 
accordingly, a by-law of a national bank is invalid where it is 
adopted at a meeting of six ad interim directors of a national 
bank which had twelve directors before its conversion from a State 
bank.4 

Validity of By-law Giving Ba^ik a Lien, etc. — The validity of a 
by-law giving- the bank a lien upon the stock as against the stock- 
holders, and restricting their transfer of the same, has been the 
subject of conflicting decisions, though it would seem that the 
later and more authoritative rulings are opposed to sustaining such 
a by-law.^ 



1. See Knight v. Old Nat. Bank, 3 
Cliff. (U. S.) 429, 431, 432; s. c, noted 
1 Nat. BankCas. g2g. 

2. U. S. Rev. Stat., § 5136. See 
quotation of language of act of 1S64, 
^ 8, and act of 1863. § 11, in Lockwood 
V. Mechanics' Nat. Bank, 9 R. I. 308; 
s. c, II Am. Rep. 253; s. c, i Nat. 
Bank Cas. 895. 

3. As to status of affairs if bank has 
never legally adopted any bv-laws, see 
Taylor v. Hutton, 43 Barb. (N. Y.) 
195; s.c, 18 Abb. Pr. (N. Y.) 16; s. ,.., i 
Nat. Bank Cas. 755. 

4. Lockwood V. Mechanics' Nat. 
Bank, 9 R. I. 308; s. c, 11 Am. Rep. 
253; s. c, : Nat. Bank Cas. 895. This 
view is based upon the familiar principle 
applicable to the proceedings of corpo- 
rations in general, as developed in 2 
Kent Com. 293; Cahill v. Kalamazoo 
Mut. Ins. Co., 2 Doug. (Mich.) 124; 
note to Ex farte Wilcocks, 7 Cow. 
(N. Y.) 401; King V. Bellringer, 4 
Term. Rep. 810, and King v. Miller, 6 
Term. Rep. 268. An objection has 
been dismissed as untenable and inap- 
plicable to the particular case, that 
seven only of the eight directors of a 
national bank were present at a meeting 
when a bv-law was adopted, in Knight 
V. Old Nat. Bank, 3 Cliff. (U. S.) 
429; o. i;., noted, [ Nat. Bank Cas. 
929. 

5. The view favorable to* the validity 
of such a by-law is taken in Lockwood 
V. Mechanics' Nat. Bank, 9 R. I. 30S; 
s. I,., I Nat. Bank Cas. 805; s.c, 11 Am. 
Rep. 253; Knight v. Old Nat. Bank, 
3 Cliff."(U. S.) 429; s. c, noted i Nat. 



Bank Cas. 929; In re Dunkerson, 
4 Biss, (U. S.) 227. The adverse view 
is maintained in Feckhimer v. Nat. 
Exch. Bank,7g Va. 80; s. c, 5 Am. & Eng. 
Corp. Cas. 156; First Nat. Bank v. 
Lainer, 11 Wall. (U. S.) 369; s. c, i 
Nat. Bank Cas. 93; BuUard v. National 
Eagle Bank, iS Wall. (U. S.) 589; s. c, 
I Nat. Bank Cas. 93: Evansville Nat. 
Bank v. Metropolitan Nat. Bank, 2 
Biss. (U. S.) 527; ». c, I Nat. Bank 
189. The controversy turns largely 
upon the intention of congress in pro- 
hibiting national banking associations 
from making loans upon shares of their 
stock (U. S. Rev. Stat., ^5201; Nat. 
Bank act, § 35), and upon a change in 
the provisions of the act, which left 
out a section providing for a lien of the 
bank upon the stock. (§ 36 of act of 
1S63, omitted in act of 1864.) 

The discussion of the question in- 
volved a consideration of by-laws re- 
lating to transfer of stock in general, 
upon which matter the above cited 
case of Lockwood v. Mechanics' Nat. 
Bank, 9 R. I. 308; s. c, 11 Am. Rep. 
253; s. c, I Nat. Bank Cas. 895, re- 
views Child V. Hudson Bay Co., 2 P. 
Wms. 207; Cunningham v. Alabama 
L. Ins. Co., 4 Ala. 652; St. Louis etc 
Ins. Co. V. Goodfellow, 9 Mo. 149; 
Wain V. Bank of North America, 8 S. 
& R. (Pa.) 73; Brent v. Bank of Wash- 
ington, 10 Pet. (U. S.) 615, and Mc- 
Dowell V. Bank of Wilmington, i Har, 
(Del.) 27. The same case also reviews 
under New York act identical in this 
matter with the national act of 1863, 
Bank of Attica v. Manufacturers' etc. 



163 



Powers. 



NA TIONAL BANKS. 



Acts Ultra Vires, 



3. Acts Ultra Vires — What Acts Not Ultra Vires. — An agreement 
by a national bank to procure a release of a mortgage held by a 
third person upon lands on which the bank also had a mortgage, 
is not ultra vires as foreign to the purposes of the corporation or 
beyond its powers ;^ and where a national bank, in order to secure 
its indebtedness, takes possession, by its cashier, of goods under 
a chattel mortgage and disposes of them,^ it cannot claim immu- 
nity from liability for any surplus remaining after payment in full 
of its claims, on the ground that its cashier, being an officer of a 
national bank, exceeded his powers and acted ultra vires?' 

Voidable by Government Only. — If a national bank has entered 
into a contract not authorized by its charter, it is held by the Su- 
preme Court of the United States that the bank cannot repudiate 
the contract and at the same time retain the fruits of such con- 



Bank, 20 N. Y. 501, and Leggett v. Y. 655; s. c, i Nat. Bank Cas. 693). 

Bank of Sing Sing, 24 N. Y. 283, and Maine (Hagar v. Union Nat. Bank, 63 

cites, in regard to ttie effect of a by- 63 Me. 509, making special distinc- 

law requiring a transfer of stock to be tions). Kentucky (Second Nat. Bank 

made on the books of the corporation, v. National Bank, 10 Bush (Ky.) 367, 

Union Bank v. Laird, 2 Wheat. (U. where a claim under articles of associa- 



S.) 293; Stebbins v. Phcenix F. Ins. 
Co., 3 Paige (N. Y.) 361; Bank of At- 
tica V. Manufacturers' etc. Bank, 20 N. 
Y. C12, Vansands xi. Middlesex Co. 



tion or by-laws was repudiated), and 
Minnesota (Nicollet Nat. Bank v. City 
Bank, 38 Minn. 85; s. c, 8 Am. St. Rep. 
643; s. c, 21 Am. & Eng. Corp. Cas. 



Bank, 26 Conn. 144; Mechanics' Bank 423, where a by-law ran counter to a 
V. New Haven etc. R. Co., 13 N. Y. State law copied from the National 
622; Fisher v. Essex. Bank, 5 Gray Bank act). A like view as to a lien 
(Mass.) 373. The Supreme Court of created by a by-law had, prior to the 
the United States, through Mr. Jus- national rulings, been favored in New 
TICK Strong, in the above cited case York, in Rosenback i\ Salt Springs 
of BuUard x-. Nat. Eagle Bank, 18 Wall. Nat. Bank, 53 Barb. (N. Y.) 495. In 
(U. S.) 589; s. c, I Nat. Bank Cas. 93, New Jersey it seems to have been con- 
■ sustains and follows the prior decision sidered in one case that a by-law of a 
of thu same tribunal in First Nat. Bank national bank is reasonable, and au- 
V. Lanier, 11 Wall. (U. S.) 369; s. c, i thorized by the act of congress, where 
Nat. Bank Cas. 70, which is also fol- it declares that no shares shall be trans- 
lowed in Evansville Nat. Bank v. Met- ferred while the holder is indebted to 
ropolitan Nat. Bank, 2 Biss. (U. S.) the bank. Young v. Vough, 23 N. J. 
527; s. c, I Nat. Bank Cas. i8g. But Eq. 325. But in a subsequent case the 
Mr. Justice Clifford dissented for, court refused to pass upon the question 
the reasons assigned by him in his whether a like by-law was legal under 
opinion in Knight v. Old Nat. Bank, 3 the act of congress, and said that the 



Cliff. (U. S.) 429. As the only other 
federal case of like tenor with that last 
cited, is In re Dunkerson. 4 Biss. (U. 
S.) 227, the preponderance of federal' 



matter must be considered as unsettled 
in that court. Mattison v. Young, 24 
N.J. Eq.j35. 

1. McCraith v. National Mohawk 



authority is clearly against the validity Valley Bank, 104 N. Y. 414. 
of a by-law of the character in ques- 2. Cooper u. First Nat. Bank, 40 
tion, and the only antagonism on the Kan. 5. A national bank can take 
authorities so far considered is between from contractors an assignment of the 
the Supreme Courts of Rhode Island money due and to become due from a 
and Virginia, respectively. The deci- city of the second class on a contract 
sion of the Supreme Court of the for paving a street, to secure an exist- 
United States has been followed or ing bona fide indebtedness by the con- 
recognized as to the lien of a national tractor to the bank. First Nat. Bank 
bank on its own stock, in New York v. Ottawa (Kan. 1890), 23 Pac. Rep. 
(Conklin v. Second Nat, Bank, 45 N. 485. 

164 



Powers. NA TIONAL BANKS. Acts Ultra Virea. 

tract •}■ and in general it is the doctrine of the later cases that 
various acts of a national bank which are ultra vires, such as the 
taking of a mortgage upon real estate to secure a contemporane- 
ous loan or future advances, are not void, but merely voidable at 
the instance of the government.** 

Certification of Check, etc. — The provision of the National Bank 
act prohibiting a national bank from certifying a check, except 
under certain circumstances, does not render the> contract of cer- 
tification illegal and void, but expressly affirms the validity af 
such contract, and impliedly limits the penalty for the violation 
of the provision to a forfeiture of the bank's charter and the wind- 
ing up of its affairs.^ Nor is a certified check illegal as being in 
violation of the provision of the National Bank act which forbids 
national banks to issue any other notes to circulate as money than 
such as are authorized by the provisions of the act.* 

Receiving Deposit as Collateral for Contract. — It has been consid- 
ered that a national bank has power to receive a deposit of money 
as collateral security for the performance of a contract of sale ; 
but that, even if the undertaking of the bank was ultra vires, yet, 
as it Was not illegal, the bank was estopped from setting up that 
defence, as it would be a fraud upon the seller to allow it to do so, 
after he had entered into the contract relying thereon. ^ 

Taking Possession of Warehouse as Security. — Where a national 
bank takes possession of a public warehouse containing grain in 
store for which warehouse receipts had been issued, and conveyed 
to it by the owner by deed of trust to secure a debt due to the 
bank, the bank cannot refuse to redeliver the grain merely because 
the conducting of a warehouse business is not within its corporate 
powers.® 

1. Casey v. La Societi etc., 2 Woods Cas. 138; s. c, 3 Nat. Bank Cas. 96; 
(U. S.) 77; &. c, I Nat. Bank Cas. 285. Union Nat. Bank v. Roman, 23 S. Car. 
See also Norton v. Derry Nat. Bank, 339; s. u., 55 Am. Rep. 26; Town of 
61 N. H. 589; s. c, 60 Am. Rep. 334; L3-ons v. Lyons Nat. Bank, 19 Blatchf. 
s. c, 3 Nat. Bank Cas. 568; First Nat. (U. S.) 279. 

Bank v. Stewart, 107 U. S. 676; s. c, 3. Thompson v. St. Nicholas Nat. 

I Am. & Eng. Corp. Cas. 138; s. c, Bank, 113 N. Y. 325; s. c, 3 Nat. Bank 

3 Nat. Bank Cas. 96. Cas. 663. 

2. Union Nat. Bank v. Matthews, ^' 4. Hunt's Appeal, 141 Mass. 515; 
U. S. 621; s. c, 2 Nat. Bank Cas. 12: s. c, 3 Nat. Bank Cas. 474. See also 
Howard Nat. Bank v. Loomis, 51 Vt. Merchants' Bank v. State Bank, 10 
349; s. c, 2 Nat. Bank Cas. 424; War- Wall. (U.S.) 604; o. c, i Nat, Bank 
ner v. De Witt Co. Nat. Bank, 4 III. Cas. 47. And as to certificates of de- 
App. 305; s. c, 2 Nat. Bank Cas. 222; posit, Riddle v. First Nat. Bank, 27 
Wroten v. Armat, 31 Gratt. (Va.) 228; Fed. Rep. 503. 

s. c, 2 Nat. Bank Cas. 426; First Nat. The National Bank act does not in- 

Bank v. Elmore, 52 Iowa 541; s. c, 2 validate an oral or conditional accept- 

Nat. Bank Cas. 237; Graham w. National ance or promise to pay a clieck when 

Bank, 32 N. J. Eq. 804; s. c, 2 Nat. the drawer has suiiicient funds in the 

Bank Cas. 293; Thompson v. St. Nicho- bank. National Bank v. National Bank, 

las Nat. Bank, 113 N. Y. 325; s. c, 3 7 W. Va. 544. 

Nat. Bank Cas. 663; Gloversville Nat. 5. Bushnell v. Chatauqua Nat. Bank, 

Bank v. Burr, 27 Hun (N. Y.) 109. 10 Hun (N. Y.) 378. 

See also First Nat. Bank v. Stewart, 6. German Nat. Bank v. Meadow- 

107 U. S. 676; s. c, I Am. & Eng. Corp. croft, 95 111. 124. 

165 



Powers. 



NA TIONAL BANKS. 



Loans, 



4. Loans WMcli Are Ultra Vires — Loaning Credit. — It seems to be 
ultra vires of a national bank to loan its credit for a compensation, 
and become an accommodation endorser of a promissory note, so 
as to procure the discounting of the paper of its customers by 
another bank, thereby evading the restraints imposed by the 
usury clauses in the National Bank act.^ 

Loans in Excess of Prescribed Proportion of Capital Slock. — But 
loans made to aay person by a national bank in excess of one-tenth 
vf its capital stock, though illegal and ultra vires, are not void ;^ 
and in an action to recover such loans the defendant cannot inter- 
pose the defence that they are in violation of the National Bank 
act, and not recoverable beyond the proportions specified.^ Nor 
can such defence be urged to defeat securities given for a loan made 
by a national bank.* 

5. Powers Concerning Personal Property — Taking Pledge or Mort- 
gage of Chattels. — The words " loans on personal security," in the 
National Bank act, are not used in any such restricted sense as to 
preclude a national bank from taking a pledge of personal chat- 
tels, such as a locomotive;* and so a national bank has implied 
authority to take, hold, and enforce a chattel mortgage given as 
security for a previously contracted debt.® 

Taking Stocks or Bonds as Security. — It is also within the inci- 
dental powers of a national bank to accept bonds as collateral se- 



1. Gloversville Nat. Bank v. Wells, 
79 N. Y. 498; reversing 15 Hun (N.Y.) 
51, or 2 Nat. Bank Cas. 333. But com- 
pare Gloversville Nat, Bank v. Burr, 27 
Hun (N. Y.) 109. A national bank 
may lend money on personal security, 
but not its credit. Seligman v. Char- 
lottesville Nat. Bank, 3 Hughes (U. S.) 
647; s. c, 2 Nat. Bank Cas. 195, 198. 
See also Johnston v. Charlottesville 
Nat. Bank, 3 Hughes (U. S.) 657; s. c, 
2 Nat. Bank Cas. 199. 

2. Gold Min. Co. t>. National Bank, 
96 U. S. 640; s. c, I Nat. Bank Cas. 151; 
Union Gold Min. Co. v. Rocky Moun- 
tain Nat. Bank, i Colo. 531. See refer- 
ence in Bowditch v. New England 
Mut. L. Ins. Co., 141 Mass. 292. 

3. Gold Min. Co. v. National Bank, 
96 U. S. 640; s. c, I Nat. Bank Cas. 
151, 152. See also to like effect O'Hare 
V. Second Nat. Bank, 77 Pa. St. 96; 
s. c, I Nat. Bank Cas. 869; Ely v. Sec- 
ond Nat. Bank, 79 Pa. St. 453: Shoe- 
maker V. Nat. Mechanics' Bank, 2 Abb. 
(U. S.) 416; s. c, I Hughes (U. S.) 
loi; Stewart v. Nat. Union Bank, 2 
Abb. (U. S.) 424; s. c, I Nal. Bank 
Cas. 175, 177; Shoemaker v. Mechan- 
ics' Nat. Bank, 31 Md. 396; s. c, 100 
Am. Dec. 73; Corcoran v. Batchelder, 

1 



147 Mass. 541; s. c, 3 Nat. Bank Cas. 
491. Compare, as to injunction against 
bank. Elder w. First Nat. Bank, I2 Kan. 
238; s. c, I Nat. Bank Cas. 4S8. And 
as to taking of notes from State bank, 
Allen V. First Nat. Bank, 23 Ohio St. 
97; s. c, I Nat. Bank Cas. S28. 

4. Mills Co. Nat. Bank v. Perry, 72 
Iowa 15; ». c.,-2 Am. St. Rep. 22S. See 
also Wyman v. Citizens' Nat. Bank, 29 
Fed. Rgp. 734. 

5. Pittsburgh Locomotive Works r. 
State Nat. Bank, 2 Cent. L. J. 692; s. c, 
21 Int. Rev. Rec. 349; s. c, i Nat. 
Bank Cas. 315. Nor is it beyond the 
power of a national bank to take a 
warehouse receipt as collateral securit}' 
for the note of a borrower. Cleveland 
V. Shoeman, 40 Ohio St. 176; s. c, i 
Am. & Eng. Corp. Cas. 140, 144; s. c, 
3 Nat. Bank Cas. 701. As to right to 
take note of third party, and other col- 
laterals, see Merchants' Nat. Bank v. 
Mears, S Biss. (U. S.) 158; s. c, i Nat. 
Bank Cas. 353. As to pledge of gold 
certificates, see Merchants' Bank v. 
State Bank, 10 Wall. (U. S.) 604; s. c, 
I Nat. Bank Cas. 47. 

6. Spofford V. First Nat. Bank, 37 
Iowa 181; s. c, 18 Am. Rep. 68; s. c, 
X Nat. Bank Cas. 486. Sec also Gaar 

66 



Powers. NA TIONAL BANKS. Negotiable Instruments. 

curity for existing debts and for future loans and discounts;^ and 
a national bank does not exceed its powers by taking stock in a 
corporation as security for 3 loan;** nor is the transfer to a national 
bank, as security for a loan, of stock of a corporation whose prop- 
erty consists of real estate invalid as a loan upon mortgage secu- 
rity, which it is incompetent for a national bank to make ;* and 
even where a national bank makes a loan upon the security of 
shares of its own stock, such as it is prohibited from making, yet 
if the prohibition can be urged against the validity of the transac- 
tion by any one except the government, this can only be done be- 
fore the contract is executed.* 

Taking Personal Property in Payment for Real Estate. — So, con- 
ceding that national banks have no power to engage generally in 
buying and selling personal property, nevertheless they have the 
power to sell real estate which they have lawfully acquired, and to 
take personal property in payment therefor.^ 

Holding Dividends as Security for Stockholder s Debt. — A na- 
tional bank has also the right to hold a cash dividend as pledged 
for the indebtedness of the shareholder to the bank, despite the 
restrictions relating to lien on its own stock, etc.® 

6. Powers Concerning Negotiable Instruments, Stocks, etc — Purchase 
of Negotiable Paper. — In the business of banking, the purchasing 
and discounting of paper is only "a mode of loaning money,"* 
and a national bank is authorized thus to acquire not only notes 
and bills ^ which are perfect and available in the hands of the 
borrower,^ but also his own paper made directly to the bank. 
Nor, according to the latest view of the matter, is it material 
whether the transaction through which the bank acquires notes is 
a purchase of the notes in the ordinary sense of the word "pur- 

V. First Nat. Bank, 20 111. App. 7. See Niagara Co. Bank v. Baker, 

611. 15 Ohio St. 68; Fleckner v. Bank of 

1. Third Nat. Bank i;. Boyd, 44 Md. United States, 8 Wheat. (U. 8.) 338; 
47; s. c, 1 Nat. Bank Cas. 545. National Bank v. Johnson, 104 U. S. 

2. Canfield v. State Nat. Bank, re- 271; s. c., 3 Nat. Bank Cas. 25; First 
ported in i Nat. Bank Cas. 312, 314, as Nat. Bank v. Sherburne, 14 III. App. 
from I N. W. Rep. 173. See also Shoe- 566. 

maker v. Nat. Mechanics' Bank, 2 " 8. As to right to take railway aid 

Abb. (U. S.) 416; s. c, I Nat. Bank coupons, see First Nat. Bank v. Town 

Cas. 169; National Bank v. Case, 99 of Bennington, 16 Blatchf. (U. S.) 53; 

U. S. 628. s. c, 2 Nat. Bank Cas. 437, 438; Town 

3. Baldwin v. Canfield, 26 Minn. 43; of Lyons v. Lyons Nat. Bank, 19 
s. c., 2 Nat. Bank Cas. 278. Blatchf. (U. S.) 279. 

4. First Nat. Bank v. Stewart, 107 9. A national bank cannot make a 
U. S. 676; ». c, I Am. & Eng. Corp. loan upon a note containing a stipula- 
Cas. 138, 139; s. c, 3 Nat. Bank. Cas. tion for attorney's fees. Merchants 
96; relied upon, as to its principle, in Nat. Bank v. Levier, 14 Fed. Rep. 662: 
■Thompson v. St. Nicholas Nat. Bank. Smith v. Exchange Bank, 26 Ohio St, 
113 N. Y. 325; o. u., 3 Nat. Bank Cas. 141; s. c, i Nat. Bank Cas. 836, 840, 
663. Compare like view as to former United 

6. First Nat. Bank v. Reno, 73 Iowa States bank in Fleckner v. Bank of 
145- United States, 8 Wheat. (U. S.) 338, 

6. Hagar v. Union Nat. Bank, 63 351. The power to buy a draft with 
Me. 509, bill of lading attached is sustained in 

167 



« 



Powers. 



NATIONAL BANKS. Negotiable instruments. 



chase," or a discount of the notes ^ as a loan to the payee,^ for the 
plea of ultra vires is not available to defeat a recovery by a na- 
tional bank upon negotiable paper purchased by it, even though 
the bank acquired such paper not as security but as its absolute 
property.*^ 

Dealing in Stocks, etc. — Though dealing in stocks by national 
banks is not expressly prohibited, yet such a prohibition is im- 
plied from the failure to grant the power;* and so the selling of 
railroad bonds on commission is not within the authorized business 
of a national bank, and therefore it may set up the defence of 
ultra vires to escape liability for any false representations of its 
teller which might have induced the purchase of such bonds. ^ 
But there may be instances where the bank is precluded from set- 
ting up the defence of ultra vires, as where it refuses to carry out 
its agreement to resell bonds to the vendor at the same price or 



Union Nat. Bank v. Rowan, 23 S. 
Car. 339; s. c," 55 Am. Rep. 26; 
and the power to buy a check in 
First Nat. Bank v. Harris, 108 Mass. 

1. As to when it is a necessary part 
of an agreement that the bank, on dis- 
counting a draft, should become the 
owner of it, see Mechanics' Nat. Bank 
V. Robins, 134 Mass. 331; s. c, 3 Am. 
& Eng. Corp. Cas. 244. A savings 
bank empowered to discount notes has 
power to purchase notes. Pope v. Cap- 
itol Bank, 20 Kan. 440; s. c, 27 Am. 
Rep. 183, 187-89; s. c, 2 Nat. Bank Cas. 
238' 243-44. 

2. Merchants' Nat. Bank v. Hanson, 
33 Minn. 40; s. c, 53 Am. Rep. 5; s. c, 
3 Nat. Bank Cas. 509. This conclusion 
is also supported by First Nat. Bank v. 
Sherburne, 14 111. App. 566. See to 
like effect as to State banks, Atlantic 
State Bank v. Lavery, 18 Hun (N. Y.) 
36. Contra, formerly First Nat. Bank 
V. Pierson, 24 Minn. 140; s. c, 31 Am. 
Rep. 341; s. c, I Nat. Bank Cas. 637; 
s. c, 3 Nat. Bank Cas. 506 (distinguish- 
ing Smith V. Exchange Bank, 26 Ohio 
St. 141; s. c, I Nat. Bank Cas. 836, and 
relj'ingupon Farmers' etc. Bank D.Bald- 
win, 23 Minn. 198; s. c, 23 Am. Rep. 
683). Also Lazear v. Nat. Union 
Bank, 52 Md. 78, 123; s. c, 36 Am. 
■f^EP- 35.?; s. c, 2 Nat. Bank Cas. 
261. 

3. Merchants' Nat. Bank v. Hanson, 
33 Minn. 40; s. c, 53 Am. Rep. 5; s. c, 
3 Nat. Bank Cas. 509, 510, overruling 
First Nat. Bank v. Pierson, 24 Minn. 
140; s, c, 31 Am. Rep. 341; s. c, i 
Nat. Bank Cas. 637; a. c, 3 Nat. Bank 
Cas. 5'o5, Upon the authority of Union 



Nat. Bank v. Matthews, 98 U. S. 621, 
s. u., 2 Nat. Bank Cas. 12, and National 
Bank v. Whitney, 103 U. S. 99; s. c, 
3 Nat. Bank Cas. 5. It has been held 
in Massachusetts that a national bank 
which purchases a promissory note 
from an endorser may maintain an ac- 
tion thereon in its own name against a 
prior party thereto, without regard to 
the question whether the purchase was 
ultra vires or was one which the bank 
was authorized by law to make. Nat. 
Pemberton Bank v. Porter, 125 Mass. 
333; s. i;., 28 Am. Rep. 235; distin- 
guishing, as decided under a special 
statute. Farmers' etc. Bank v. Bald- 
win, 23 Minn. 198; s. c, 23 Am. Rep. 
6S3, and First Nat. Bank v. Pierson, 24 
Minn. 140; s. i;., i Nat. Bank Cas. 637; 
and itself followed in Atlas Nat. Bank 
V. Savery, 127 Mass. 75; s. c, 2 Nat. 
Bank Cas. 273. The question of the 
power of a national bank to purchase 
promissory notes was held not to arise 
in Attleborough Nat. Bank v. Rogers, 
125 Mass. 339. But its authority to 
buy checks, whether payable to bearer 
or to order, was distinctly upheld in 
First Nat. I3ank v. Harris, 108 Mass. 

4. First Nat. Bank v. Nat. Exch. 
Bank, 92 U. S. 122; s. c, i Nat. Bank 
Cas. 124. See also First Nat. Bank v. 
Hoch, 89 Pa. St. 324; s. c, 33 Am. Rep. 
769; s. c, ^ Nat. Bank Cas. 375. But 
see contra, as to power to sell stocks, 
Williatns v. Mason, 12 Hun (N. Y.) 97. 

5. Weckler v. First Nat. Bank, 42 
Md. 5S1; s. u., 20 Am. Rep. 95; s. c, i 
Nat. Bank Cas. 533; relj'ing upon 
analogy of Talmage- •i'. Pell, 7 N. Y. 
32S. 



168 



Foweis. 



NA TIONAL BANKS. Concerning Eeal Estate. 



less ■} and so the taking of stocks may be justified when it is 
done in compromising a debt due the bank or a claim against it.* 
The authority of national banks to exchange or deal in govern- 
ment bonds or securities seems to be sustained by some of the 
decisions ;* but the question afjpears to be interwoven with that 
concerning the power to receive special deposits in general.* 

7. Powers Concerning Real Estate — To Take Mortgage of Real 
Estate. — A national banking association may purchase, hold and 
convey real estate only for purposes specified in the National Bank 
act ;^ and these give such authority as to real estate mortgaged 
to it in good faith by way of security for debts previously con- 
tracted.® Accordingly, in general, the loaning of money upon 
mortgage or other real estate security is ultra vires, as being for- 
bidden by the act of congress;' but this does not apply to the, 
case where a bank has in good faith taken a mortgage by way of 
security for a previously existing debt, which comes within one of 
the express exceptions in the act ;* though a mortgage of real 
estate to a national bank to secure a contemporaneous^ or fu- 



1. Logan Co. iSat. Bank v. Town- 
send (Ky. 18S7), 3 S. W. Rep. 122; s. c, 
3 Nat. Bank Cas. 448. 

Z. First Nat. Bank v. National Excli. 
Bank, 92 U. S. 122; a. c., i Nat. Bank 
Cas. 124; relying upon Fleckner v. 
Bank of United States, 8 Wheat. (U.S.) 
351. 

3. Caldwell v. Nat. Mohawk Valley 
Bank, 64 Barb. (N. Y.) 333; Van 
Leuven v. First Nat. Bank, 54 N. Y. 
671; s. c, I Nat. Bank Cas. 724; Leach 
■V. Hale, 31 Iowa 69; s. u., 7 Am. Rep. 
112; s. c, I Nat. Bank Cas. 466; 
Yerkes v. National Bank, 69 N. Y. 
382; s. c, 25 Am. Rep. 208; s. u., 2 
Nat. Bank Cas. 296. 

4. See First Nat. Bank v. Ocean 
Nat. Bank, 60 N. Y. 278; s. c, i Nat. 
Bank Cas. 728; commenting on Van 
Leuven v. First Nat. Bank, just cited. 
But compare Yerkes v. National Bttnk, 
just cited. 

5. U. S. Rev. Stat, § 5137. 

6. U. S. Rev. Stat., ^ 5137. 

7. Fowler v, Scully, 72 Pa. St. 456; 
s. c, I Nat. Bank Cas. 854; s. c, 13 
Am. Rep. 699; Merchants' Nat. Bank 
V. Mears,8 Biss. (U. S.) 158; s. c, i Nat. 
Bank Cas. 353, 355; Crpcker v. Whit- 
ney, 71 N. Y. 161; s. c, I Nat. Bank 
Cas. 745. But compare Wroten v. 
Armat, 31 Gratt. (Va.; 228; s.c, 2 Nat. 
Bank Cas. 426. 

8.. Woods V. People's Nat. Bank, 83 
Pa. St. 57; s. c, I Nat. Bank Cas. 888; 
Allen V. First Nat. Bank, 23 Ohio St. 
97; s. c , I Nat. Bank Cas. 82S; Kansas 



Valley Nat. Bank v. Rowell, 2 Dill. (U. 
S.) 371; s. c, I Nat. Bank Cas. 264; 
Worcester Nat. Bank v. Cheeney, 87 
111. 602; s. c, 2 Nat. Bank Cas. 227; 
Reynolds v. Crawfordsville First Nat. 
Bank, 112 U. S. 405; s. c, 3 Nat. Bank 
Cas. 131; Farmers' etc. Nat. Bank v. 
Wallace, 45 Ohio St. 152. So of deed ot 
trust, Warner v. DeWitt Co. Nat. 
Bank, 4 111. App. 305; s. c, 2 Nat. Bank 
Cas. 222. 

9. Kansas Valley Nat. Bank v. Row- 
ell, 2 Dill. (U.S.) 371; s.c, t Nat. Bank 
Cas. 264; Fridley v. Bowen, 87 111. 151; 
s. c, ^ Nat. Bank Cas. 224. But see 
Warner --. DeWitt Co. Nat. Bank, 4 
111. App. 305; s. c, 2 Nat. Bank Cas. 
222, 223. So of a deed of trust, Matr 
thews V. Skinker, 62 Mo. 329; ». c, 21 
Am. Rep. 423; s. c, i Nat. Bank Cas. 
647. But compare Union Nat. Bank v. 
Matthews, 98 U. S. 621; ». c, 2 Nat. 
Bank Cas. 12; Thornton v. National 
Exch. Bank, 71 Mo. 221; s. c, 3 Nat. 
Bank Cas, 513. For mortgage held not 
to have been given as security for a debt 
concurrently created, see Orms v. Mer- 
chants Nat. Bank, 16 Kan. 341; ». i,., i 
Nat. Bank Cas. 490. Compare also 
First Nat. Bank v. Haire, 36 Iowa 443; 
s.c, I Nat. Bank Cas. 480; Richards v. 
Kuntze, 4 Neb. 201; s. c, i Nat. Bank 
Cas. 652; Upton v. National Bank, 120 
Mass. 153; s. c, I Nat. Bank Cas. 618; 
Howard Nat. Bank v. Loomis, 51 Vt. 
349; o. c, 2 Nat. Bank Cas. 424; Ripley 
V. Harris, 3 Eiss. (U. S.) 199, regarding 
»point as not made. 



169 



Powers. 



NATIONAL BANKS. Concerning Real Estate. 



ture ^ loan is invalid,^ or, rather, according to the distinctton drawn 
by the later cases, voidable at the instance of the government."* 

To Purchase Real Estate. — The national bank act authorizes a 
bank established under it to purchase, hold and convey such real 
estate as it shall purchase under judgments, decrees or mortgages 
held by it, or to secure debts due it,* and under this provision a 
national bank may purchase such real estate as may be necessary 
in order to secure a debt due to it,^ although of greater amount 
than such debt, if the security of the debt is the real object of 
the purchase ;® nor is it forbidden, by either the letter or the 
spirit of the law, to make a purchase, for such purpose, of real 
estate which is encumbered i'' nor is it material that the title to the 
land, for which considerably more than the debt is paid, is taken 
in the name of the president of the bank, if this is done for the 
use of the bank.* But conveyances to a national bank must for 
all purposes, according to the later authorities, be regarded as 
valid until called in question by a direct proceeding instituted for 
that purpose by the government.^ 



1. Fowler v. Scully, 72 Pa. St. 456; 
s. c, I Nat. Bank.Cas. 854; s. c, 13 Am. 
Rep. 699; Kansas Valley Nat. Bank v. 
Rowell, 2 Dill. (U. S.) 371; s. c, i Nat. 
Bank Cas. 264; Crocker v. Whitney, 71 
N. Y. 161; s. c, I Nat. Bank Cas. 745. 

2. Kansas Valley Nat. Bank v. Row- 
ell, 2 Dill. (U. S".) 371; s. i;., I Nat. 
Bank Cas. 264. 

3. Union Nat. Bank v. Matthews, 98 
U.S. 621; s. c, 2 Nat. Bank Cas. 12; 
National Bank v. Whitney, 103 U. S. 
99, 100, 103; ^. c, 3 Nat. Bank Cas. 5; 
Fortier T). New Orleans Nat. Bank, 112 
U. S. 439; s. c, 3 Nat. Bank Cas. 140; 
Howard Nat. Bank v. Loomis, 51 Vt. 
349; s. c, 2 Nat. Bank Cas. 424; War- 
ner V. DeWitt Co. Nat. Bank, 4 111. 
App. 305; o. c, 2 Nat. Bank Cas. 222. 
Relating to deed of trust and discredit- 
ing authority of Fridley v. Bowen, 87 
111. 151; s.c, 2 Nat. Bank Cas. 224 (But 
comfare comments of Mulkey, J., in 
Penn v. Bornman, 102 111. 523) ; Wroten 
V. Armat, 31 Gratt. (Va.) 228; s. c, 2 
Nat. Bank Cas. 426; First Nat. Bank 
V. Elmore, 52 Iowa 541; s. c, 2 Nat. 
Bank Cas. 237; Graham v. National 
Bank, 32 N. J. Eq. 804; s. c, 2 Nat. 
Bank Cas. 293; Simons v. First Nat. 
Bank, 93 N. Y. 269; s. c, 3 Nat. Bank 
Cas. 622; Oldham v. Wilmington Bank 
85 N. Car. 240; s. c, 3 Nat. Bank Cas. 
688. See also, as to deed of trust, 
Thornton z>. National Exch. Bank, 71 
Mo. 221; s. c, 3 Nat. Bank Cas. 513. 
And as to transfer of mortgage by re- 
organized State bank, Scbfield v. State 
Nat. Bank, 9 Neb. 316; s, c, 31 Am. Repr 



412; s. c, 2 Nat. Bank Cas. 280. Ref- 
erengs to the doctrine is made in Bow- 
ditch V. New England Mut. L. Ins. Co., 
141 Mass. 292. 

4. U. S. Stat. 1864, ch. 106. See 
Heath x'. Second Nat. Bank, 70 Ind. 
106; s. c, 3 Nat. Bank Cas. 406; Wherry 
x>. Hale, 77 Mo. 20; s. t., 3 Nat. Bank 
Cas. 521. A national bank which has 
loaned money on timber land may, to 
protect itself and collect the debt, pur- 
chase the land at foreclosure sale, and 
cut and sell the timber. Roebling v. 
First Nat. Bank, 30 Fed. Rep. 744, 746. 

5. See as to acquisition in discharge 
of debt previously contracted, Turner 
V. First Nat. Bank, 78 Ind. 19; s. c, 3 
Nat. Bank Cas. 408. 

6. Upton V. National Bank, 120 Mass. 
153; s. c, I Nat. Bank Cas. 618. 

7. Mapes V. Scott, 88 111. 352; s.c, 
2 Nat. Bank Cas. 22S. See reference to 
this case in Mapes v. Scott, 94 111. 

379- 

8. Libbey i'. Union Nat. Bank, 99 111. 
622; s. c, 3 Nat. Bank Cas. 358. As to 
bank causing convej'ance to individual 
which creates a trust, see Wherry v. 
Hale, 77 Mo. 20; s. c, 3 Nat. Bank Cas. 

521, .';23- 

9. Mapes w.£cott, 94 111. 380; Reyn- 
olds V. Crawfordsville First Nat. Bank, 
112 U. S. 405; s. c, 3 Nat. Bank Cas. 
131; Union Nat. Bank v. Matthews, 98 
U. S. 621; s. c, 2 Nat. Bank Cas. 12; 
Wherry v. Hale, 77 Mo. 20; s. c, 3 Nat. 
Bank Cas. 521. See also Turner w. First 
Nat. Bank, 78 Ind. 19; s. c, 3 Nat. Bank 
Cas. 408. 



170 



Liabilities in General. NA TIONAL BANKS. LiabiUties in General. 

Acquiring Additional Property as Furtlier Security. — The fact 
that a national bank, in order to secure a debt, purchases addi- 
tional property to that mortgaged to it and which it had the right 
to acquire, does not affect the validity of the transaction, so as to 
render it assailable by the debtor or by any party except the 
government;^ nor is there any reason why such a bank may not 
thus purchase a prior mortgage,** or take a new mortgage incor- 
porating a note and mortgage against the same party, which it 
has purchased from a third person.^ 

Security for Advances. — A loan of money made by a national 
bank on the security of a mortgage maybe enforced; objection 
to the bank's taking a mortgage lien, as security for future ad- 
vances, can only be made by the United States.^ 

Power to Sell Real Estate. — There is, in the National Bank act, 
no restriction upon the power "to convey" real estate; and a 
national bank may sell its real estate on terms of credit and re- 
serve a mortgage to secure the price.* 

V. LIABIEITIES IN General — Not Imposed Upon Government. — 
National banks are private corporations, organized for private 
gain, and managed by officers of their own selection, so that they 
constitute no part of the government ; and though the comptrol- 
ler of the currency has supervisory powers over them, yet this 
does not involve the government in any liability for their acts, 
except the statute liability for the final redemption of their cir- 
culating notes.® Nor does designating a national bank as a 
national depository of public moneys''' change the character of its 
organization, or convert its managers into public officers, or ren- 
der the government liable for its acts.^ 

For Undertaking of Individual, Dependent on Ratification. — A 
written promise signed by an individual as commissioner for a 
national bank, to give stock thereof when it is fully organized, 
and a designated sum of money when it is in operation, in con- 
sideration of expenditures for the institution and services ren- 
dered it, is not the contract of the bank upon which it is liable, 

1. Rej'nolds v. Crawfordsville First also Reynolds v. Bank, 112 U. S. 
Nat. Bank, 112 U. S. 405; s. c, 3 Nat. 405. 

Bank Cas. 131. And see Union Nat. 5. New Orleans Nat. Bank v. Ray- 
Bank t'. Matthews, 98 U. S. 621; s. c, 2 mond, 29 La. An. 355; s. c., 29 Am. 
Nat. Bank Cas. 12; National Bank v. Rep. 335. 

Whitnej', 103 U. S. 99; s. c, 3 Nat. 6. Branch v. United States, 12 Ct. of 

Bank Cas. 5; Swope v. LefBngwell, 105 CI. 281. As to limits of doctrine ex- 

U. S. 3. empting national banks from State 

2. Holmes v. Boyd, 90 Ind. 332; s. c, legislation as instrumentalities of the 
3 Nat. Bank C.as. 414. federal government, see First Nat. 

3. Oldham W.Wilmington Bank, 85 N. Bank f. Com., 9 Wall. (U. S.) 353, 361. 
Car. 240; s. c, 3 Nat. Bank Cas. 688. 7. As is done under the National 

4. Fortier 1). New Orleans Nat. Bank, Bank act, §4";; 13 Stat, at Large 113;' 
112 U. S. 439; Nat. Bank v. Whitney, Rev. Stat. U.S., ^5153. 

103 U. S. 99; Winton v. Little, 94 Pa. 8. Branch v. United States, 12 Ct. of 
St. 64; s.c, 3 Nat. Bank Cas. 725. See CI. 28' 

171 



Interest and Usury. 



NATIONAL BANKS. 



In General. 



unless so made by the bank, by its approval and adoption after 
its organization. 1 

Where Reorganized Out of State Bank. — A State bank does not 
relieve itself from any liabilities by reorganizing as a national 
bank ;^ and accordingly the national bank is properly sued for a 
reward offered while the bank was a State institution.* 

Liability for Losses by Theft. — A national bank is liable for the 
loss of United States bonds, where, while they were in its hands, its 
cashier agreed to exchange them for registered bonds, but the 
bank neglected to do so, and the bonds were stolen ;* but such a 
bank is not liable for the theft by an absconding teller of bonds 
deposited by a gratuitous bailee, where the teller's accounts 
turned out to be false, and it appeared that he had been abstract- 
ing the funds of the bank for two years, merely because the 
bank failed to examine his accounts.^ 

VI. Interest and ITsuby — 1. Interest in General — State Rate Fol- 
lowed. — National banks, under the liberal construction given to 
the act of congress, may take the rate of interest allowed by the 
State to lenders generally,® and may take a higher rate, if State 
banks of issue are authorized by the laws of the State to reserve 
more,' whether such authorization be by general statute or by 
special charter.^ 



1. McDonough v. Bank of Houston, 
34 Tex. 309. 

2. Coffey V. National Bank, 46 Mo. 
140; s. c, 2 Am. Rep. 48S. See also, 
Kelsej V. National Bank, 69 Pa. St. 
426; s. c., I Nat. Bank Cas. 847. As to 
liability for debts of transformed bank, 
see Thorpe v. Wegefartli, 56 Pa. St. 82; 
o. c, 93 Am. Dec. 789. Consult further 
as to status of reorganized bank, City 
Nat. Bank v. Phelps, 97 N. Y. 44; s. c, 
49 Am. Rep. 513; Scofield v. State Nat. 
Bank, 9 Neb. 316; s. c, 31 Am. Rep. 
412; Grocers' Nat. Bank v. Clark, 48 
Barb. (N. Y.) 26. 

3. Kelsey v. National Bank, 69 Pa. 
St. 426; s. c, I Nat. Bank Cas. 847. 

4. Yerkes v. National Bank, 69 N. 
Y. 382; 0. c, 25 Am. Rep. 20S. See 
also as to liability of bank for cashier's 
hypothecation of stocks entrusted for 
sale bj' a distant customer, Williamson 
V. Mason, 12 Hun (N. Y.) 97, 100. 

5. Scott V. National Bank, 72 Pa. St. 
471; s. c, I Nat. Bank Cas. 864. 

6. Tiffany v. National Bank, iS Wall. 
(U. S.) 409; s. c, I Nat. Bank C^as. go, 
construing Nat. Bank act, § 30; U. S. 
Rev. Stat., § 5197; Wiley v. Starbuck, 
44 Ind. 29S; s, c, I Nat. Bank Cas. 
436. Accordingly, in Califoryiia, na- 
tional banks may charge and receive 
such rates of interest as may be agreed 



upon. Hines v. Marmolejo, 60 Cal. 
229; o. u., 3 Nat. Bank Cas. 338, noted 
in Farmers' Nat. Gold Bank v. Stover, 
60 Cal. 387, 393. To the same effect is 
National Bank v. Bruhn, 64 Tex. 571; 
s. c, 53 Am. Rei5. 771. 

7. Tiffany v. National Bank, 18 Wall. 
(U. S.) 409, 411; s. >.., 1 Nat. Bank Cas. 

go- 
See also National Bank v. Johnson, 
104 U. S. 271; s. c, 3 Nat. Bank Cas. 25; 
and, generally, Farmers' etc. Nat, Bank 
V. Dearing, 91 U. S. 29; s. c, i Nat. 
Bank Cas. 117; Wiley v. Starbuck, 44 
Ind. 298; s. c, I Nat. Bank Cas. 436. 

But in Ohio it is held that if the rate 
allowed for banks of issue is lower than 
that for other persons, the former rate 
must be followed. Shunk v. First Nat. 
Bank, 22 OhioSt. 50S; s. c, 10 Am. Rep, 
762; s. c, I Nat, Bank Cas, 820, dis- 
tinguishing the federal case of Parks v. 
First Nat. Bank, cited from Banker's 
Mag. for Dec, 1S70, p. 416 (which we 
do not find regularly reported). Corn- 
fare also as to higher rate for a few 
banks of issue, Duncan v. First Nat. 
Bank, 11 Bank. Mag. 787; s, c, i Nat. 
Bank Cas. 360, 361. 

8. First Nat. Bank v. Duncan, 24 Int. 
Rev. Rec. 206 (apparently reversing 
case between same parties in i Nat, Bank 
Cas, 360). But the charter must be put 



172 



Interest and TTsury. NATIONAL BANKS. In General. 

Special State Rate. — Where, by the statute law of a State, par- 
ties are allowed to contract for a rate of interest higher than the 
ordinary legal rate, if such contract be evidenced by a memoran- 
dum in writing, signed by the party to be charged, a national 
bank located in the State may, without liability for usury, dis- 
count notes and charge such higher rate in advance without other 
memorandum than the notes.^ But it has been held, though it 
may well be doubted if such is the law, that national banks are 
not authorized to take the rate of interest allowed by special 
statutes of a State to a few banks of issue, where such rate is 
higher than that allowed to banks of issue generally.^ 

Addition of Current Rate of Exchange. — It is not usurious but 
expressly allowable for a national bank to receive the current rate 
of exchange, as well as legal interest, on the discounting of a 
draft ; and to enforce a forfeiture against the bank for excessive 
interest, it must affirmatively appear that the exchange charged 
exceeded the current rate.^ 

Legal Rate Where No State Rate. — If no rate of interest is fixed 
by the laws of the State wherein the national bank is located, it 
is provided by the act of congress that seven per cent, is the 
highest limit of the allowed rate.* And this rule applies, so as to 
make a higher rate of interest a cause of forfeiture, where a State 
statute forbids a corporation to interpose the defence of usury, 
and this statute has been construed to the effect that the rate of 
interest which a corporation may pay is not fixed or limited." 

State Usury Laws Superseded. — It is within the constitutional 
power of congress to fix the rate of interest which a national 
bank might take upon a loan of money, and to determine the 
penalty to be imposed for taking a greater rate :** and this power, 
when exercised, is exclusive of State legislation,' so that the pro- 
visions of the national bank act irhposing penalties upon national 

in proof, or judicial notice will not be 2. Duncan v. First Nat. Bank, ii 

taken of the banking institution. First Bank. Mag. 787; s. c, i Nat. Bank Cas. 

Nat. Bank v. Gruber, 86 Pa. Stat. 46S; 360. But see First Nat. Bank v. Tinst- 

s. c , with title reversed, 2 Nat. Bank man, 36 Leg. Int. 182; s.c, 2 Nat. Bank 

Cas. 382, 386-87. Cas. 182, and compare Lebanon Nat. 

Usury in General. — Concerning con- Bank v. Karmanj', 98 Pa. St. 65; s. c, 

flict of State laws as to usury, see Na- 3 Nat. Bank Cas. 746. 

tional Bank v. Smoot, 2 McArthur (U. 3. Wheeler v. National Bank, 96 U. 

S.) 371; Hackettstown Nat. Bank v. S. 268: s. c, 2 Nat. Bank Cas. 9. 

Rea, 64 Barb. (N. Y.) 175. A surety 4. U. S. Rev. Stat., ^ 5197. 

cannot avail himself of usury paid by 5. In re Wild, 11 Blatchf. (U. S.) 

his principal. Lamoille Co. Nat. Bank 243; s. c, i National Bank Cas. 

V. Bingham, 50 Vt. 105; s. c, 28 Am. 246. 

Rep. 105. As to requisites of answer 6. Central Nat. Bank v. Pratt, 115 

setting up usury, see National Bank v. Mass. 539; s. c, 15 Am. Rep. 138; s. c, 

Orcutt, 48 Barb. (N. Y.) 256, 257. i Nat. Bank Cas. 595. 

1. Newell V. National Bank, 12 Bush * 7. Central Nat. Bank v. Pratt, as just 

(Ky.) 57, 60; s. c, I Nat. Bank Cas. cited; Wiley v. Starbuck, 44 Ind. 298; 

501. As to effect of a like statute in s. c, i Nat. Bank Cas. 436; Higley v. 

Indiana, see Wiley v. Starbuck, 44 Ind. First Nat. Bank, 26 Ohio St. 75; s. c, 

298; s. c, I Nat. Bank Cas. 436. i Nat. Bank Cas. 833. 

173 



Interest and TTsnry. 



NATIONAL BANKS. 



Penalty. 



banks for taking usury, supersede the State laws upon that , sub- 
ject. ^ 

2. Penalty for Taking Excessive Interest — Only Penalty Prescribed. 
— Under the national bank act the only penalty for the taking of 
usurious interest is the forfeiture of all interest stipulated for, and, 
where the interest has been paid, the recovery back of twice the 
amount of such interest ;^ and the act does not declare void the 
contract under which the usurious interest is paid.* 

Jurisdiction of State Courts. — The decided weight of the more 
recent decisions is in favor of sustaining the jurisdiction of the 
State courts in actions against national banks for penalties and 
forfeitures for exacting and receiving usurious interest.* 

Forfeiture of Entire Interest. — The provision of the federal 
statute to the effect that the reserving, etc., of usury upon a note 
shall be held a forfeiture of the entire interest which the note 
carries with it, applies to a discount of the note at a usurious 
rate ;^ and also to interest accruing by law upon nonpayment 
after maturity.*' The forfeiture, under the later phraseology of 
the act, is of the interest stipulated for, but not of the debt 
itself;'^ and it is the doctrine of the authorities in general that this 



1. Davis V. Randall, 115 Mass. 547; 
B.C., 15 Am. Rep. 146; o.c, i Nat. Bank 
Cas. 600; First Nat. Bank v. Cliilds, 133 
Mass. 248; s.. c, 43 Am. Rep. 509; s. c, 
3 Nat. Bank Cas. 469; Farmers' etc. 
Nat. Bank v. Dearing, 91 U. S. 29; s. 
c, I Nat. Bank Cas. 117; First Nat. 
Bank ik Childs, 130 Mass. 519; s. c, 39 
Am. Rep. 474; Hambrightf. Cleveland 
Nat. Bank, 3 Lea (U. S.) 40; s. c, 31 
Am. Rep. 629; s. c, 2 Nat. Bank Cas. 
419, overruling Steadman v. Redfield, 8 
Baxt. (Tenn.1 337. ' 

See also First Nat. Bank i'. Garling- 
house, 22 Ohio St. 492; s. c, 10 Am. 
Rep. 751; Merchants' etc. Nat. Bank v. 
Myers, 74 N. Car. 514. 

Contra, see First Nat. Bank v. 
Lamb, 50 N. Y. 95; s. i;., 10 Am. Rep. 
43S, overruled with Farmers' Bank v. 
Hale, 59 N. Y. 53, in Hintermister v. 
First Nat. Bank, 64 N. Y. 212; s. c, i 
Nat. Bank Cas. 741. 

Coinfarp. also In re Wild, 11 Blatcht". 
(U. S.) 243; s. c, I Nat. Bank Cas. 246. 

2. Farmers' etc. Nat. Bank v. Dear- 
ing, 91 U. S. 29; s. c, I Nat. Bank Cas. 
117; Barnet w. Muncie Nat. Bank, 98 
U. S. 55s; s. c, 2 Nat. Bank Cas. 18 
(discussed in First Nat. Bank i'. Childs, 
133 Mass. 248; s. >,. 43 Am. Rep. 509); 
Lebanon Nat. Bank t'.Karmanj, 98 Pa. 
St. 65; s. c, 3 Nat. Bank Cas. 746. 

See also Schuvler Nat. Bank v. Bul- 
long, 24 Neb. 825; s. c, 3 Nat. Bank 
Cas. 561; Merchants' etc. Nat. Bank v. 



Meyers, 74 N. Car. 514; Wiley i;. Star- 
buck, 44 Ind. 298; s. c, I Nfat. Bank 
Cas. 436; National Bank v. Eyre, 52 
Iowa 114; s. c, 2 Nat. Bank Cas. 234; 
National Exch. Bank v. Moore, 2 Bond 
(U. S.) 170; National Bank v. Davis, 8 
Biss. (U. S.) 100; s. I,., I Nat. Bank Cas. 
350; Hill ■?'. National Bank, 15 Fed. 
Rep. 432. The provisions of the act of 
1S64 are quoted in Hade v. McVay, 31 
Ohio St. 231; s. c, 2 Nat. Bank Cas. 

3. Oates V. First Nat. Bank, 100, U. 
S. 239; s. c, 2 Nat. Bank Cas. 35. See 
also Lazar v. National Union Bank, 52 
Md. 78; s. c, 36 Am. Rep. 355; and as 
to fraud on creditors, Appeal of Second 
Nat. Bank, 96 Pa. St. 460; s. c, 3 Nat. 
Bank Cas. 739. 

4. Snyder, J., in Lynch v. Merchants' 
Nat. Bank, 22 W. Va. 554; s. c, 46 Am. 
Rep. 520. The authorities upon this 
subject will be given later in discussing 
the forfeiture and penalty prescribed by 
the act of congress. 

5. National Bank v. Lewis, 81 N. Y. 
15; s. c, 3 Nat. Bank Cas. 587. 

6. Alves V. Henderson Nat. Bank 
(Ky. 1888), 9 S. W. Rep. 504; s. c, 3 
Nat. Bank Cas. 452; First Nat. Bank 
V. Stauffer. i Fed. Rep. 187; s. c, 2 
Nat. Bank Cas. 178. 

7. .Farmers' etc. Nat. Bank v. Dear- 
ing, 91 U. S. 29; s. c , I Nat. Bank Cas. 
117; First Nat. Bank t'. Garlinghouse, 
22 Ohio St. 492; s. c, 10 Am. Rep. 751, 



174 



Interest and XTsory. 



NA TIONAL BANKS. 



Penalty. 



forfeiture, relating only to interest reserved and not to that 
receivtd, refers to the enforcement of the contract by judicial 
process, in which case the ground of forfeiture may be set up as 
a defence and the bank can recover only the sum actually loaned 
or advanced without any interest at all •} but the later view holds 
that the forfeiture is not available by way of set-off or counter- 
claim to an action on the note ;* nor, in Pennsylvania, where there 
is a series of renewal notes, bearing usurious interest, given for 
the continuation of the same original loan or advance, is the 
defendant, sued upon one of them, entitled to defalk the usurious 
interest on another which is not in suit ;** and in Ohio the penalty 
for receiving usurious interest on other and independent loans 
is also held not available as a set-off.* The party with whom 
the bank had the usurious transaction is the party to whom the 
forfeiture of interest is to be adjudged, and the rights and liabili- 
ties of other parties are not affected.^ The forfeiture of the in- 
terest can be invoked, according to the great preponderance of 
authority, in an action in the State court, as well as in the United 
States court ;*• and the bank will be charged with the knowledge 



National Exch. Bank v. Moore, 2 
Bond (U. S.) i5yo; Wiley v. Starbuck, 
4^ Ind. 298; s. c, I Nat. Bank Cas. 
436, merely quoting this point at p. 445; 
Malone v. Falls, noted in report of 
Cheek v. Merchants' Nat. Bank, 10 
Heisk. (Tenn.) 618 (which does not 
pass upon question); Hade v. Mc- 
Vay, 31 Ohio St. 231; s. c, 2 Nat. 
Bank Cas. 353; Bank of Cadiz v. 
Slemmons, 34 Ohio St. 142; s. c, 32 
Am. Rep. . 364; Sharswood, J., in 
Overholt v. National Bank, 82 Pa. St. 
490; s. c, I Nat. Bank Cas. 883; Citi- 
zens' Nat. Bank v. Leming, S Int. Rev. 
Rec. 132; National Bank v. Davis, 8 
Biss. (U. S.) 100; s. c, I Nat. Bank 
Cas. 350; First Nat. Bank v. Gisn, 72 
Pa. St. 13. 

1. Sharswood, J., in Brown Ti. Sec- 
ond Nat. Bank, 72 Pa. St. 209; s. c, i 
Nat. Bank Cas. 849. See also Over- 
holt V. National Bank, 82 Pa. St. 490; 
s. i;., I Nat. Bank Cas. 883; Lucas x>. 
Government Nat. Bank, 78 Pa. St. 228; 
o. c, 21 Am. Rep. 17; Third Nat. Bank 
V. Miller, go Pa. St. 241; b. c, 2 Nat. 
Bank Cas. 37S; Guthrie v. Reid, 107 
Pa. St. 251; s. c, 3 Nat. Bank Cas. 751; 
First Nat. Bank v. Childs, 130 Mass. 
519, 522; s. c. 39 Am. R'ep. 474; Hin- 
termister v. First Nat. Bank, 64 N. Y. 
212; s. c, 1 Nat. Bank Cas. 741. 

2. National Bank v. Lewis, 81 N. Y. 
15; s. c, 3 Nat. Bank Cas. 588; overrul- 
ing on this point National Bank v. 
Lewis, 75 N. Y. 516; s. c, 2 Nat. Bank 



175 



Cas. 305; s. t., 31 Am. Rep. 484. See 
also IJarnet v. Muncie Nat. Bank, 98 
U. S. 555; s. c, 2 Nat. Bank Cas. 18; 
First Nat. Bank v. Gruber, 91 Pa. St. 
377; s. c, 2 Nat. Bank Cas. 395; First 
Nat. Bank v. Childs, 133 Mass. 24S; 
s. c, 43 Am. Rep. 509. 

3. Overholt v. National Bank, 82 Pa. 
St. 490; s. c, I Nat. Bank Cas. 8S3, 
distinguishing Brown v. Second Nat. 
Bank, 72 Pa. St. 209; s. c, i Nat. Bank 
Cas. . 849, and Lucas v. Government 
Nat. Bank, 78 Pa. St. 228; s. c, 21 Am. 
Rep. 17. 

4. Hade v. McVay, 31 Ohio St. 231; 
s. c, 2 Nat. Bank Cas. 353. 

5. Smith V. Exchange Bank, 26 Ohio 
St. 141; s. c, I Nat. Bank Cas. 836. 
See also Lazier v. Nat. Union Bank. ^2 
Md. 78; s. c, 36 Am. Rep. 355. But 
compare Guthrie v. Reid, 107 Pa. St. 
251; s. c, 3 Nat. Bank Cas. 7151. 

6. First Nat. Bank v. Childs, 130 
Mass. 519; s. c, 39 Am. Rep. 474; 
Pickett V. Merchants' Nat. Bank, '32 
Ark. 346; s. c, 2 Nat. Bank Cas. 209; 
Lynch v. Merchants' Nat. Bank, 22 W. 
Va. 554; s. c, 46 Am. Rep. 520. See 
also National Bank v. Eyre, 152 Iowa 
114; s. c, 2 Nat. Bank Cas. 234. CoM^j-a, 
Newell V. National'Bank, 12 Bush (K}'.) 
37; s. u., 1 Nat. Bank Cas. 501. As to 
what constitutes usurious transactions 
so as to be a subject of forfeiture, and 
who may set up the usury, see Pickett 
V. Merchants' Nat. Bank, 32 Ark. 346; 
s. c, 2 Nat. Bank Cas. 209. 



Interest and Usury. 



NATIONAL BANKS. 



Double Interest. 



of its president.^ 

Recovery of Double Interest. — It is almost uniformly held that 
in an action against a national bank which has received Usurious 
interest for twice the interest paid, the recovery is of twice the 
entire interest paid and not merely of double the excess of in- 
terest over the legal rate,^ and it is now quite as well settled that 
a claim for such double interest cannot be made by way of set-off 
or counter-claim to an action brought by the national bank,** but 
that the remedy given by the statute is a penal suit, and that 
redress can be had in no other mode or form of procedure,* nor 
does a bill in equity lie to recover usury against a national bknk 
pursuant to a State law.^ The person paying usurious interest 
may recover twice its amount, although the principal is riot paid,*^ 
and the bank cannot set off a judgment held by it against the 
plaintiff,''' nor can it successfully defend against a party who 
obtains from it, by endorsement, a discount of paper of other 
parties, even though such transaction would not be usurious, as 
between natural persons in the State in which the bank is located.* 
It is necessary to allege in the petition that the act was knowingly 
done.^ 

3. Action to Recover Double Interest — Who May Bring. — Not 



1. Newport Nat. Bank v. Tweed, 4 
Houst. (Del.) 221;. 

2. Crocker v. First Nat. Bank, 4 Dill. 
(U. S.) 358; s. c, I Nat. Bank Cas. 
317; National Bank v. Davis, 8 Biss. 
(U. b.) 100; s. c., I Nat. Bank Cas. 
3f,o; Hill V. National Bank, 15 Fed. 
Rep. 432; Lebanon Nat. Bank v. 
Karmany, 98 Pa. St. 65; s. c. 3 Nat. 
Cas. 746; National Bank v. Trimble, 
40 Ohio St. 62g; Schuyler Nat. Bank 
V. BuUong, 24 Neb. 825; s. c , 3 Nat. 
Bank Cas. 561. Contra, Hintermister 
V. First Nat. Bank, 64 N. Y. 212; s. c, 
I Nat. Bank Cas. 741. There was a 
recovery of twice the excess only — 
though the point is not discussed, in 
Johnson %>■ N::.tional Bank, 74 N. Y. 
329; s. c, 30 Am. Rep. 302; affirmed in 
National Bank v. Johnson, 104 U. S. 
271; s. c, 3 Nat. Bank Cas. 25. 

3. Barnet v. Muncie Nat. Bank, 98 
U. S. 555; s. c, 2 Nat. Bank Cas. 18; 
Ellis V. First Nat. Bank, 11 111. App. 
275; s. c, 3 Nat. Bank Cas. 378; First 
Nat. Bank v. Gruber, 91 Pa. St. 377; 
s. c, 2 Nat. Bank Cas. 395; National 
Bank v. Dushane, 96 Pa. St. 340; s. c, 
3 Nat. Bank Cas. 739 (overruling in 
this regard Lucas v. Government Nat. 
Bank, 78 Pa. St. 22S; s. c, 21 Am. Rep. 
17, and Overholt v. National Bank, 82 
Pa. St. 490; s. c, I Nat. Bank Cas. 
8S3); First Nat. Bank v. Childs, 133 
Mass. 248; s. c, 43 Am. Rep. 509; Old- 



ham v. Wilmington Bank, 85 N. Car. 
240; s. c, 3 Nat. Bank Cas. 688; Fraker 
V. CuUum, 24 Kan. 679. 

4. Barnet v. Muncie Nat. Bank, 98 
U. S. 555; s. i;., 2 Nat Bank Cas. i8. 
See also Oldham v. Wilmington Bank, 
81; N. Car. 240; s. c, 3 Nat. Bank Cas. 
688. 

5. Hambright v. Cleveland Nat. 
Bank, 3 Lea (Tenn.) 40; s. c, 31 Am'. 
Rep. 629, overruling Steadman v. Red- 
field, 8 Baxt. (Tenn.) 337, and followed 
in Barrett v. National Bank, 85 Tenn. 
426. As to want of standing in court 
of equity before waiver of penaltj', see 
Oldham v. Wilmington Bank, 85 N.. 
Car. 240; s. c, 3 Nat. Bank Cas. 688. 

6. Lebanon Nat. Bank v. Karmany, 
98 Pa. St. 65; s. c, 3 Nat. Bank Cas. 
746; Monongahela Nat. Bank v. Over- 
holt, 96 Pa. St. 327; s. c, 3 Nat. Bank 
Cas. 735; Stout V. Ennis Nat. Bank, 69 
Tex. 384. 

7. Lebanon Nat. Bank v. Karmany, 
98 Pa. St. 65; s. c, 3 Nat. Bank Cas. 
746. As to agreenjent constituting 
good defence to action, see Morehouse 
V. Second Nat. Bank, 98 N. Y. 503; 
s. c, 3 Nat. Bank Cas. 631; reversing 
30 Hun (N. Y.) 628. 

8. National Bank v. Johnson, 104 
U. S. 271; s. u., 3 Nat. Bank Cas. 25. 

9. Schuyler Nat. Bank v. Bullong, 
24 Neb. 821; s. c, 3 Nat. Bank Cas^ 
558. 



176 



Interest and Usury. 



NA TIONAL BANKS. 



Bouble Interest. 



only may the person paying the interest bring suit to recover 
double the amount paid, but also his legal representatives, such as 
an assignee in bankruptcy of the borrower,^ or the receiver of an 
insolvent national bank,* but a judgment creditor of the borrower 
cannot maintain such an action, as he is in no sense the debtor's 
legal representative.* 

Jurisdiction of State Courts. — State courts, according to the 
view generally maintained, have jurisdiction in actions against 
national banks to recover back the penalty imposed upon such 
banks for taking usurious interest.* 

Time to Commence. — The allowance of a recovery of double in- 
terest, under the national bank act, is subject to the proviso that 
the action be commenced within two years from the time the 
usurious transaction occurred.^ 

When Limitation Begins to Run. — This limitation of two years, 
within which an action for such penalty must be brought, com- 
mences to run from the actual payment of the usury,® and each 
payment of illegal interest must be regarded as a "transaction" 
within the intent of the statute, so that the limitation begins to 
run from the time such payment is actually made, and so on for 
each successive payment on renewals of the same loan ; "^ but it 
has been held that where the usurious interest is reserved by way 
of discount, the period of limitation does not begin to run until 



1. Crocker v. First Nat. Bank, 4 
Dill. (U. S.) 358; s. c, I Nat. Bank 
Cas. 317; Wright v. First Nat. Bank, 8 
Biss. (U. S.) 243; s. c, 2 Nat. Bank 
Cas. 138; National Bank z^. Trimble, 40 
Ohio St. 629; Monongahela Nat. Bank 
V. Overholt, 96 Pa. St. 327, 330; s. c, 
3 Nat. Bank Cas. 735, 737. 

2. Barbour v. National Exch. Bank, 

45 Ohio St. 133; s. c, 17 Am. & Eng. 
Corp. Cas. 134. 

3. Barrett v. National Bank, 85 Tenn. 
426. 

4. Lebanon Nat. Bank v. Karmany, 
98 Pa. St. 65; s. c, 3 Nat. Bank Cas. 
746; Gruber v. First Nat. Bank, 87 Pa. 
St. 465; s. c, 2 Nat. Bank Cas. 382; 
Bletz V. Columbia Nat. Bank, 87 Pa. 
St. 87; s. c, 30 Ara. Rep. 343; Dow v. 
Irasburgh Nat. Bank, 50 Vt. 112; s. u., 
28 Am. Rep. 493, drawing distinction 
that action brought only for excess 
over illegal interest. Ordway v. Cent- 
ral Nat. Bank, 47 Md. 217; s. c, 
28 Am. Rep. 455: Lynch v. Mer- 
chants' Nat. Bank, 22 W'. Va. 554; s. c, 

46 Am. Rep. 520; Hade v. McVay, 31 
Ohio St. 231; s. c, 2 Nat. Bank Cas. 
353; Kinser v. Farmers' Nat. Bank, 58 
Iowa 728; Pickett v. Merchants' Nat. 
Bank, 32 Ark. 346; s. c, 2 Nat. Bank 
Cas. 209; Schuyler Nat. Bank v. 

16C. ofL.— 12 1 



Bullong, 24 Neb. 825; s. c, 3 Nat. 
Bank Cas. 561; Schuyler Nat. Bank 
ZK BoUong, 24 Neb. 821; s. i,., 3 Nat. 
Bank Cas. 558; First Nat. Bank v. 
Overman, 22 Neb. 116; s. c. 3 Nat. 
Bank Cas. 556. Contra. Newell v. 
National Bank, 12 Bush (Ky.) 57; s. c, 
I Nat. Bank Cas. 501. Compare Mis- 
souri R. Tel. Co. V. First Nat. Bank, 
74 111. 217; s. c, I Nat. Bank Cas. 401. 

6. Higley v. First Nat. Bank, 26 Ohio 
St. 75; s. c.| I Nat. Bank Cas. 833; s. t., 
20 Am. Rep. 7159; National Bank v. 
Davis, 8 Biss. (U. S.) 100; s. c, : Nat. 
Bank Cas. 350. See also Nat. State 
Bank v. Boylan, 2 Abb. N. Cas. (N. Y.) 
216; s. c, I Nat. Bank Cas. 798. 

6. Brown v. Second Nat. Bank, 72 
Pa. St. 209; s. c, I Nat. Bank Cas. 849, 
853; Stephens v. Monongahela Nat. 
Bank, 88 Pa. St. 157; s. c, 32 Am. 
Rep. 438; s. c, 2 Nat. Bank Cas. 398; 
Shinkle v. First Nat. Bank, 22 Ohio St. 
516; s. c, I Nat. Bank Cas. 824, 828; 
Hintermister v. First Nat. Bank, 64 N. 
Y. 212; s. c, I Nat. Bank Cas. 741, 

744- 

7. Lynch v. Merchants' Nat. Bank, 
22 W. Va. 554; ». c. 46 Am. Rep. 520. 
See also Hintermister v. First Nat. 
Bank, 64 N. Y. 212; s. c, i Nat. Bank 
Cas. 741 

77 



Interest and Usury. 



NA TIONAL BANKS. 



UsuriouB Interest. 



the principal has been paid or a judgment entered for the full 
amount thereof.* 

4. Usurious Interest on Series of Renewal Notes — Credit for Inter- 
est Paid from Beginning. — It is the doctrine declared by various 
authorities that where there has been a series of renewal notes 
given for the continuation of the same original loan, a taint of 
usury in the first transaction follows down through the whole,* 
and in an action by a national bank, on the last of the series, the 
borrower is entitled to credit for all the interest he has paid from 
the beginning.^ 

No Set-Off of Interest on Prior Notes. — But later cases hold 
that usurious interest paid a national bank on successive renewals 
of a series of notes cannot be set-off in an action by the bank on 
the last of them.* 

Renewal Without Additional Usury. — It is also settled* that 
the receipt of usurious interest on a note by a national bank 
works a forfeiture of the interest accruing after the maturity of 
the note as well as before maturity,® and that such forfeiture and 
usury are not purged by settlements and renewal notes without 
additional usury.' 

Limitation Inapplicable to Defence of Usury. — Nor does the 
limitation of two years, provided by the statute for the recovery 
of forfeitures for usury, apply to the defence of usury.® 



1. Duncan v. First Nat. Bank, ii 
Bank. Mag. 787; s. c, i Nat. Bank 
Cas. 360. But see against any limita- 
tion in sucii cases First Nat. Bank v. 
Cliilds, 133 Mass. 248; s. c, 43 Am. 
Rep. 509; s. c, 3 Nat. Bank Cas. 469. 

2. See Farmers' & Mechanics' Bank 
V. Hoagland, 7 Fed. Rep. 159, 161. 

3. Snyder, J., in Lj-nch v. Mer- 
chants' Nat. Bank, 22 W. Va. 554; s. c, 
46 Am. Rep. 520; Cake v. First Nat. 
Bank, 86 Pa. St. 303; ». c, i Nat. Bank 
Cas. 8go; Overholt v. National Bank, 
82 Pa. St. 490; s. c, I Nat. Bank Cas. 
883; Stephens v. Monongahela Nat. 
Bank, 88 Pa. St. 157; s. c, 32 Am. Rep. 
438; s. c, 2 Nat. Bank Cas. 398. See also 
National Bank v. Lewis, 75 N. Y. 516; 
s. c, 2 Nat. Bank Cas. 305; s. c, 31 
Am. Rep. 484; Moniteau Nat. Bank v. 
Miller, 73 Mo. 187; National Bank v. 
Davis, 8 Biss. (U. S.) 100; s. c, i Nat. 
Bank Cas. 350. 

4. Driesbach v. National Bank, 104 
U. S. 52; s. c, 3 Nat. Bank Cas. 19; 
Barnet v. Muncie Nat. Bank, 98 U. S. 
555; s. c, 2 Nat. Bank Cas. 18; Farm- 
ers' etc. Bank v. Hoagland, 7 Fed. Rep. 
159, 161; National Exch. Bank v. 
Boylen, 26 W. Va. 554; s. c, 53 Am. 
Rep. 113; First Nat. Bank d. Childs, 
133 Mass. 24S; s. c, 43 Am. Rep. 509; 



178 



s. c, 3 Nat. Bank Cas. 469; National 
Bank v. Lewis, 81 N. Y. 15; s. t., 3 
Nat. Bank Cas. 587; modifying same 
case in 75 N. Y. 516, or 31 Am. Rep. 
484, or 2 Nat. Bank Cas. 305; National 
Bank v. Dushane, 96 Pa. St. 340; s. c, 
3 Nat. Bank Cas. 739; First Nat. Bank 
V. Gruber, 91 Pa. St. 377; s. c, 2 Nat. 
Bank Cas. 395 (which last two cases 
must be regarded as overruling Over- 
holt V. National Bank, 82 Pa. St. 490; 
s. c, I Nat. Bank Cas. 883I; Oldham 
V. Wilmington Bank, 8i; N. Car. 240; 
s. c, 3 Nat. Bank Cas. 6§8. 

5. Lynch v. Merchants' Nat. Bank, 
22 W. Va. 554; s. u., 46 Am. Rep. 520. 

6. See Moniteau Nat. Bank w. Miller, 
73 Mo. 187, 191. 

7. Pickett V. Merchants' Nat. Bank, 
32 Ark. 346; s. c, 2 Nat. Bank Cas. 
209. See also National Bank v. Eyre, 
52 Iowa 114: s. c, on other points, 2 
Nat. Bank Cas. 234; Farmers' etc. 
Bank v. Hoagland, 7 Fed. Rep. 159. 

8. Pickett V. Merchants' Nat. Banlc, 
32 Ark. 346; s. u., 2 Nat. Bank Cas. 
209, 215; Lynch v. Merchants' Nat. 
Bank, 22 W. Va. 554; s. c, 46 Am. 
Rep. 520; First Nat. Bank v. Childs, 
133 Mass. 248; s. c, 43 Am. Rep. 509; 
s. c, 3 Nat. Bank Cas.' 469; First Nat. 
Bank v. Childs, 130 Mass. 519; s. c, 39 



Taxation. 



NA TIONAL BANKS. 



In General. 



VII. Taxation — 1. Taxation in General — Design of Provision Con- 
cerning.- — The provision of the national bank act, which author- 
izes the taxation by State authority of the shares of stock in a 
national bank,^ was not intended to curtail the power of the 
States on the subject of taxation, but to protect the corporations 
formed under its authority from unfriendly discrimination by the 
States in the exercise of their taxing power,* nor was it intended 
to prohibit the exemption of particular kinds of property or par- 
ticular classes of persons.* 

Imposed Only Upon Shares. — Ordinarily, the capital of a bank 
is its property, and is liable to taxation, unless specially ex- 
empted;'' but the view of the federal legislation, which has been 
adopted, is, that congress has limited the States to taxation upon 
the shares in national banks, as distinguished from taxation of 
the banks eo nomine upon their property or capital.^ 

When Capital Invested in Federal Securities. — And the stock- 
holders of a national bank may be taxed on their stock or shares 
by the States, although all the capital of the bank be invested in 
federal securities, provided the taxation does not violate the rule 



Am. Rep. 474; s. c, 3 Nat. Bank Cas. 
465; Ellis V. First Nat. Bank, 11 111. 
App. 275; s. c, 3 Nat. Bank Cas. 378; 
Moniteau Nat. Bank v. Miller, 73 Mo. 
187. 

1. See statement of original provi- 
sion in Frazer v. Siebern, 16 Ohio St. 
614, 617; s. c. noted on other points, i 
Nat. Bank Cas. 936. This provision is 
contained in 13 U. S.Stat, at Large 99; 
Rev. Stat. U. S., § 5219. Of change 
therein in Richmond v. Scott, 48 Ind. 
568; s. c, I Nat. Bank Cas. 445. 

2. Adams v. Nashville, 95 U. S. 19; 
s. c, T Nat. Bank Cas. 148. 

3. Adams v. Nashville, 95 U. S. 19; 
s. c, I Nat. Bank -Cas. 148. Compare 
Hepburn v. School Directors, 23 Wall. 
(U. S.) 480, 485; s. c, I Nat. Bank 
Cas. 213, 116. And see comments on 
these cases in Boj-er v. Bo3'er, 113 U. 
S. 689; s. c, 3 Nat. Bank Cas. 151. 

For Internal Revenue Purposes. — Na- 
tional banks were not exempt from ex- 
amination by internal revenue officers. 
United States v. Rhawn, 11 Phila. 
(Pa.) 521; s. c, 1 Nat. Bank Cas. 358. 
Interest paid and dividends declared 
vifere held taxable in Blake v. National 
Banks, 23 Wall. (U. S.) 307. See also 
United States v. Central Nat. Bank, 24 
Fed. Rep. 577, reversing 15 Fed. Rep. 
222; United States v. State Nat. Bank, 
I McCrarj (U. S.) 183. 

4. New Orleans v. Peoples' Bank, 27 
La. An. 646. See as to doctrine that a 
tax on shares of bank stock is merel}' a 

1 



mode of taxing the property of the 
bank, Wright v. Stiltz, 27 Ind. 338. 

B. St. Louis Nat. Bank v. Papin, 4 
Dill. (U. S.) 29; s. c, . Nat Bank Cas. 
326; Collins V. Chicago, 4 Biss. (U. S.) 
472; s. c, I Nat. Bank Cas. 191; Van 
Allen V. Assessors, 3 Wall. (U. S.) 
^73, 1585-88; s. c, I Nat. Bank Cas. i, 
6-8; Bradley v. People, 4 Wall. (U. S.) 
459, 462; ». I,., I Nat. Bank Cas. 14; 
Nat. Commercial Bank v. Mayor 
etc. of Mobile, 62 Ala. 284; s. c, 34 
Am. Rep. 15; s. c, 2 Nat. Bank Cas. 
440; Sumner Co. v. Gainesville Bank, 
62 Ala. 464; s. c, 34 Am. Rep. 30; s. c, 
2 Nat. Bank Cas. 449, 450; Maguire z'. 
jBoard of Revenue, 71 Ala. 401; s. c, 
6 Am. & Eng. Corp. Cas. 452. See 
also Frederick Co. v. Farmers' etc. 
Nat. Bank, 48 Md. 117; a. c, 2 Nat. 
Bank Cas. 252, 253; Stetson v. Bangor, 
56 Me. 274; s. c, on other points, i 
Nat. Bank Cas. 520; First Nat. Bank 
V. Com., 9 Wall." (U. S.) 353; s. c, i 
Nat. Bank Cas. 34; First Nat. Bank v. 
Smith, 65 111. 44, 47; s. c, I Nat. Bank 
Cas. 390, 391 (referring to status of 
Utica V. Churchill, 33 N. Y. i6i, and 
People V. Bradley, 39 111. 130, under 
the rulings of the United States Su- 
preme Court); Carthage v. First Nat. 
Bank, 71 Mo. 503; s. c, 36 Am. Rep. 
494; s. c, 2 Nat. Bank Cas. 279; Hub- 
bard V. Johnson Co.. 23 Iowa 130, 144; 
s. u., noted, i Nat. Bank Cas. 932; 
Morseman v. Younkin, 27' Iowa 350, 
et seq.; s. c, i Nat. Bank Cas. 460, 461, 
79 



Taxation. 



NA TIONAL BANKS. 



Authority of State. 



that it shall not exceed the rate imposed upon the shares of 
State banks established where the national bank is located ; * and 
it is immaterial that the tax is collected from the bank through 
its cashier, instead of directly from the individual shareholders.^ 

Real Estate. — Real estate owned by a national bank is taxable 
by State authority^ in the township where it is situated.* 

2. Authority of State to Tax — Provision Giving Such A uthority. 
— The National Bank act provides that the shares of stock in 
national banks may be subjected to taxation under the laws of 
the State, ^ with other personal property, subject only to the two 
restrictions that the taxation shall not be at a greater rate than is 
assessed upon other moneyed capital in the hands of individual 
citizens of such State, and that the shares of any national banking 
association owned by nonresidents of any State shall be taxed in 
the city or town where the bank is located, and not elsewhere." 

Congressional Basis of Authority. — It is said to have been many 
times held, by the Supreme Court of the United States, that the 
authority of the States to tax the shares of national bank stock 
is derived wholly from the act of congress, and that without the 
consent of congress these bank stock shares could not be taxed 



et seq.; Smith v. First Nat. Bank, 17 
Mich. 479; Curtis v. Ward, 58 Mo. 
295; First Nat. Bank v. Meredith, 44 
Mo. 500; Lionberger v. Rowse, 43 Mo. 
67; Pittsburgh v. First Nat. Bank, 55 
Pa. St. 45; McLaughlin. z<. Chadwell, 7 
Heisk. (Tenn.) 389; Packard v. Lewis- 
ton, 55 Me. 456; People v. Nat. Gold 
Bank, 51 Cal. 508; Salt Lake City 
Bank v. Golding, 2 Utah 100; Waco 
Nat. Bank v. Rogers, 51 Tex. 606; Har- 
rison V. Vines, 46 Tex. 15. 

1. Miller, J., in First Nat. Bank v. 
Com., 9 Wall. (U. S.) 353; s. c, i 
Nat. Bank Cas. 34. See Van Allen v. 
Assessors, 3 Wall. (U. S.) 573, o. c, i» 
Nat. Bank Cas. i; People v. Commis- 
sioners of Taxes etc., 4 Wall. (U. S.) 
244; s. c, I Nat. Bank Cas. 9; Wright 
V. Stiltz, 27 Ind. 338; reversing Whit- 
ney -v. Madison, 23 Ind. 331. Consult 
also Stetson v. Bangor, 56 Me. 274; s. 
c, on other points, i Nat. Bank Cas. 
520, 521; Williams v. Weaver, 75 N. 
'Y.30; Hubbard ti. Johnson Co., 23 Iowa 
130; First Nat. Bank v. Board of Re- 
viewers, 41 La. An. 181; McLaughlin 
■V. Chadwell, 7 Heisk. (Tenn.) 38^; Ex- 
change Nat. Bank v. Miller, 19 Fed. 
Rep. 372; First Nat. Bank v. Farwell, 
10 Biss. (U. S.) 270; People v. Commis- 
sioners of Taxes etc., 8 Hun (N. Y.) 
536; Harrison v. Vines, 46 Tex. 15. 
Compare S^ilt Lake Bank v. Golding, 2 
Utah t; State v. Hart, 31 N. J. L. 434. 

2. First Nat. Bank v. Com., 9 Wall. 



(U. S.) 353; s. c, I Nat. Bank Cas. 36. 

3. National Commercial Bank v. 
Mayor etc. of Mobile, 62 Ala. 284; s. c, 
34 Am. Rep. 15; s. c, 2 Nat. Bank, 
Cas. 440; Second Nat. Bank v. Cald- 
well, 13 Fed.. Rep. 429,' 432. But see 
Rosenberg v. Weeks. 67 Tex. 578; s. c, 
iS Am. & Eng. Corp. Cas. 140. 

4. Loftin Z'. Citizens' Nat. Bank, 85 
Ind. 341. But against assessment of 
banking-office and lot as real estate 
eo nomine, see Rice Co. v. Citizens' 
Nat. Bank, 23 Minn. 280,281; s. c, i 
Nat. Bank Cas. 629, 630. As to tax- 
ing banking-house by tax on shares, 
see Lackawanna Co. i'. First Nat. Bank, 
94 Pa. St. 221. 

5. This authority was held not exer- 
cised in Minnesota in County Treas- 
urer V. Webb, II Minn. 500, 502; s. c, 
noted I Nat. Bank Cas. 935. 

6. U. S. Rev. Stat., § 5219. Almost 
identical limitations upon the taxation 
of national bank shares are imposed by 
the Indiana statute (Rev. Stat. 1881, §^ 
6306, 6307). Wasson V. First Nat. 
Bank, 107 Ind. 206; s. c, 3 Nat. Bank 
Cas. 419. The auihority of the States 
to tax national bank shares is treated 
as settled in Packard v. Lewiston, 55 
Me. 456; Mclver v. Robinson, 53 Ala. 
456; s. c, I Nat. Bank Cas. 372, dis- 
cussing grounds for not exempting 
such shares; Hubbard t'. Johnson Co., 
23 Iowa 130. See also Miiitzer v. 
Montgomery Co., 54 Pa. St. 139. 



ISO 



Taxation. 



NATIONAL BANKS. 



Discrimination. 



by State authorities at all;i but such authority on the part of the 
States has sometimes been upheld as existing prior to the enact- 
ment of the foregoing provision.* 

Congressional Control of Taxation. — The power possessed by 
the States to tax national banks can be exercised only in the man- 
ner and on the conditions prescribed by congress.^ 

State Bank Converted Into National Bank. — An enabling act is 
valid which required a State bank to pay all taxes imposed upon 
it by State laws up to the date of its becoming a national bank.* 

3. Discrimination as Compared with Other Moneyed Capital. — In 
General. — National bank shares may not be subjected to State 
taxation, where a very material relative part of other moneyed 
capital in the hands of individual citizens within the same juris- 
diction or taxing district is exempted from such taxation." 

Credits Are '■'■ Moneyed Capital." — And all credits of whatever 
nature, including the credits from which the taxpayer may deduct 
his bona fide debts, whether interest bearing or not,** are " moneyed 
capital " in the sense in which that term is used in the act of con- 
gress.'^ 

Deduction of Bona Fide Debts. — Accordingly, State statutes 

1. ZoLLARS, J., in Wasson v. First 45; Com. v. Girard Bank, i Pearson 



Nat. Bank, 107 Ind. 206: !>. c, 3 Nat. 
Bank Cas. 419. See People v. Weaver, 
100 U. S. 539; s. c, 3 Nat. Bank Cas. 
57, 61, and cases there cited, which 
arose prior to the present National 
Bank act; also Austin v. Aldermen, 7 
Wall. (U. S.) 694: s. c, I Nat. Bank 
Cas. 15; Rich v. Packard Nat. Bank, 
138 Mass. 527; Bressler v. Wayne Co., 
25 Neb. 468; s. c, 25 Am. & Eng. Corp. 
Cas. 301; s. c, 3 Nat. Bank Cas. 564; 
Maguire v. Board of Revenue, 71 Ala. 
401; s. c, 6 Am. & Eng. Corp. Cas. 452; 
State V. Haight, 31 N.J. L. 399; Car- 
thage V. First Nat. Bank, 71 Mo. 508; s. 
c, 36 Am. Rep. 494; o. c, 2 Nat. Bank 
Cas. 279; Pittsburg h v. First Nat. Bank, 
55 Pa. St. 45; First Nat. Bank v. St. 
Joseph, 46 Mich. 526. But compare 
Pollard V. State, 65 Ala. 628; Raffin v. 
Board of Commrs., 69 N. Car. 498; s. 
c, I Nat. Bank Cas. 806. 

2. Stetson v. City of Bangor, 56 Me. 
274, 282-283; s. c, on other points, i 
Nat. Bank Cas. 520, 521. 

3. Pollard -v. State, 65 Ala. 628; Ma- 
guire V. Board of Revenue, 71 Ala. 401; 
s. c, 6 Am. & Eng. Corp. Cas. 452. 
See also National Commercial Bank v. 
Mayor etc. of Mobile, 62 Ala. 284; s. c, 
34 Am. Rep. 15; s. c, 2 Nat. Bank 
Cas. 440; Sumter Co. v. Gainesville 
Nat. Bank, 62 Ala. 464; ». c, 34 Am. 
Rep. 30; s. c, 2 Nat. Bank Cas. 449; 
Pittsburgh v. First Nat. Bank, 55 Pa. St. 



(Pa.) 323- 

4. Manufacturers' etc. Bank v. Com., 
72 Pa. St. 70; s. c, noted i Nat. Bank 
Cas. 937; affirming 2 Pa. (Pearson's 
Dec.) 3S6, 3S9. Enabling act held to 
apply only to banks which availed 
themselves of its provisions. Mintzer 
V. Montgomery Co., 54 Pa. St. 139; s. 
c, noted i Nat. Bank Cas. 936. As to 
bonus which, after reorganization of 
State bank, could only be exacted as a 
tax, which the State had no right to im- 
pose, see State v. National Bank, 33 
Md. 75; s. c, I Nat. Bank Cas. 527. 

B. Boyer v. Boyer, 113 U. S. 689; 
s. c, 3 Nat. Bank Cas. 151. What con- 
stitutes discrimination as compared 
with other moneyed capital is discussed 
in Providence Inst. i'. Boston, loi Mass. 
575; s. c, 3 Am. Rep. 407; s. c, i Nat. 
BankCas.578; inLemleyt/. ForsythCo., 
85 N. Car. 379; in First. Nat. Bank v. 
Richmond, 25 Am. & Eng. Corp. Cas. 
298, note; in Mercantile Nat. Bank v. 
Mayor etc. of N. Y., 121 U. S. 138; 
^. c, 18 Am. & Eng. Corp. Cas. 92; 
». c, 3 Nat. Bank Cas. 243; and in the 
note to Nat. Newark Banking Co. v. 
Mayor etc. of Newark, 121 U. S. 163; 
18 Am. & Eng. Corp. Cas. ii6, 120. 

6. See Hepburn v. School Directors, 
23 Wall. (U. S.) 4S0, 484; o. c, I Nat. 
Bank Cas. 113, 115. 

7. Wasson v. First Nat. Bank, 107 
Ind. 206; s. c, 3. Nat. Bank Cas. 419. 



181 



Taxation. NATIONAL BANKS. Discrimination. 

which allow the taxpayer to deduct his debts from such moneyed 
capital and deny this right to the holders of shares of national 
bank stock, must, yield to the paramount act of congress, which 
inhibits such discrimination.^ But where the statute makes no 
provision for deducting debts from the assessed value of shares 
of national bank stock, and yet allows such deduction from a 
portion of other moneyed capital, thereby discriminating against 
national bank stock, the question whether that discrimination is 
so material and serious that the owners of such shares of stock 
are entitled to deduct their debts, notwithstanding the statute, 
depends upon the amount of the moneyed capital from which the 
debts of the taxpayer may be deducted, as compared with the 
whole of the moneyed capital of the State.* 

'No Incorporated Banks" Not Standard of Comparison. — Nor 
does the act of congress, which protects national banks from injuri- 
ous discrimination, limit the standard of comparison to the " mon- 
eyed capital " invested in the " incorporated banks " of a State, but 
it extends to all moneyed capital "in the hands of individual 
citizens," and to equalize the shares of national banks as to a part 
only of that moneyed capital is not to equalize them as to the 
whole, which is necessary to comply with the federal statute.^ 

Equality Between State and National Banks Not Required. — 
Indeed, the provision of the national bank act respecting the 
taxation of national banks, does not require perfect equality 
between State and national banks, but only that the system of 
taxation in a State shall not work a discrimination favorable to its 
own citizens and corporations and unfavorable to holders of 
shares in national banks.* 

Where Shares of Various Companies Escape Taxation. — It seems, 
furthermore, that a State statute taxing national bank shares is 
not necessarily subject to the objection that it discriminates 
unfavorably against national banks, even if there be no law of the 
State imposing a tax upon shares of transportation, insurance, 
trading and other miscellaneous companies or upon deposits in 
savings banks,^ for investments in such companies are distin- 

1. Wasson y. First Nat. Bank, as just 4. Davenport Nat. Bank v. Daven- 
cited. See Bressler v. W^ayne Co., 25 port Board of Equalization, 123 U. S. 
Neb. 468, 472; s. c, 3 Nat. Bank Cas. 83; s. c, 3 Nat. Bank Cas. 285; s. c, 18 
564,567; s. c, 25 Am. & Eng. Corp. Am. & Eng. Corp. Cas. 154, ruling tliat 
Cas. 301. Comfare Maguire v. Board there is no case to hold a State statute 
of Revenue, 71 Ala. 401, 415; s. c, 6 unconstitutional if the system of taxa- 
Am. & Eng. Corp. Cas. 452. tion created by it does not, on the face 

2. See concerning extent of discrim- of the statute, in the necessary usual 
ination Wasson v. First Nat. Bank, 107 or probable effect of the system, dis- 
Ind. 206; s. c, 3 Nat. Bank Cas. 419; criminate against national banks, and 
Bo3'er v. Boyer, 113 U. S. 68g; s. c, 3 no evidence is given of the intention of 
Nat. Bank Cas. 151; People v. Weaver, the legislature to make such a discrim- 
100 U. S. 539; s. c, 2 Nat. Bank Cas. ination, nor an3' proof that it works 
57; City Nat. Bank v. Paducah, 2 Flip, an actual and material discrimina 
(U. S.)"6i; s. c, I Nat. Bank Cas. 300. tion. 

3. First Nat. Fank v. Lucas Co., 25 5. McMahon v. Palmer, 102 N. Y. 
Fed. Rep. 749. " 176; s. i_., 3 Nat. Bank Cas. 636; s. c, 

182 



Taxation. NATIONAL BANKS. Exemption. 

guishable from moneyed capital in the hands of individuals.^ 

Uniformity Among Municipalities Not Required. — So the uni- 
formity required has been considered not to be between different 
municipalities of States or Territories, but to merely exact that 
wherever the shares of national banks are taxed, whether for 
State, territorial, county, school, town or city purposes, the assess- 
ment should not be at a greater rate than is assessed on other 
moneyed capital in the hands of individual citizens of such 
State.2 

4. Exemption of Portion of Other Moneyed Capital — Partial Ex- 
emption for Local Purposes. — It has been held, in effect, that a 
partial exemption by a State, for local purposes', of moneyed 
capital in the hands of individuals, does not of itself, and without 
reference to the aggregate amount of moneyed capital, not so ex- 
empted, establish the right to a similar exemption* in favor of 
national bank shares held by persons within the same jurisdic- 
tion.* 

Exemption of Relatively Material Part of Other Moneyed Capi- 
tal. — But national bank shares may not be subjected to local tax- 
ation when a very material part, relatively, of other moneyed 
capital in the hands of individual citizens within the jurisdiction 
or taxing district is exempt from such taxation.^ 

Exemption of Mortgages, Judgments, etc. — And where the State 
of Pennsylvania had exempted from local taxation, for county 

55 Am. Rep. 796; s. t., 12 Am. & Eng. S.) 573; s. c, ■ Nat. Bank Cas. i, with 

Corp. Cas. 297. that in People v. Commrs., 4 Wall. (U. 

1. McMahon v. Palmer,_ just cited. S.) 244; s. c, i Nat. Bank Cas. 9, and 

Nor is the New York act declaring followed in National Newark Banking 

that the stockholders in banks organ- Co. v. Mayor etc. of Newark, 121 U. 

ized under the authoritj of the State, S. 163, 165; s. c , iS Am. & Eng. Corp. 

or of the United States, shall be as- Cas. 114; s. i;., 3 Nat. Bank Cas. 261;. 

sessed for the -value of their share of See also Maguire v. Board of Revenue, 

stock (Act of July ist, 1882, § 312) in- 71 Ala. 401; s. c. 6 Am. & Eng. Corp, 

consistent with the provision of the Cas. 452; Silver Bow Co. v. Davis, 6 

National Bank act, forbidding the taxes Mont. 306; s. c, 3 Nat. Bank Cas. 546; 

on national bank shares to be higher First Nat. Bank v. Waters, 19 Blatchf. 

than those assessed on other moneyed (U. S.) 242. 

capital in the hands of individual citi- 2. People f.Moore,! Idaho (U. S.) 504. 
zens of the State (U. S. Rev. Stat., § 3. As to tax not amounting to an 

5219), although the assessment rolls entire exemption of National Bank 

showed that taxation was virtually es- shares, see Lackawanna Co. v. First 

caped by the securities of life insurance Nat. Bank of Scranton, 94 Pa. St. 221, 

companies, the stock of locally incorpo- 224. 

rated companies and corporations of 4. Hepburn v. School Directors, 23 

extra-State incorporations owned in the Wall. (U. S.) 4S0, 4S5; s. c, i Nat. 

State, the stock of trust companies, Bank Cas. 113. See also McLaughlin ?■. 

and the deposits of savings banks. Chadwell, 7 Heisk. (Tenn.) 389; s. c, 

Mercantile Nat. Bank i>. Mayor etc. noted, i Nat. Bank Cas. 938; Gorgas's 

of N. Y., 121 U. S. 138, 145; s". c, 18 Appeal, 79 Pa. St. 149; s. c, noted i 

Am. & Eng. Corp. Cas. 92; s. c, 3 Nat. Nat. Bank Cas. 937; Everett's Appeal, 

Bank Ca6. 243, fully discussing scope of 71 Pa. St. 216; s. c, noted i Nat. Bank 

restriction in National Bank act, and Cas. 937. 

purporting to reconcile rule of decision 5. Boj-er v. Boj'er, 113 U. S. 689; 

in Van Allen v. Assessors, 3 Wall. (U. s. c, 3 Nat. Bank Cas. 151. 

183 



Taxation. NATIONAL BANKS. Deduction. 

purposes, mortgages, judgments, etc., and imposed such local 
taxes upon the shares of national bank stock, it was held* that the 
result was a material inequality, and that the bank stock could 
not be taxed for such local purposes.^ 

Savings Banks Deposits. — Yet, however much the amount of 
moneyed capital in the hands of individuals in the shape of 
deposits in savings banks, which the policy of the State exempts 
for its own purposes, that exemption cannot affect the validity of 
the rule for the taxation of shares in national banks, provided 
they are taxed at a rate not greater than other moneyed capital 
in the hands of individual citizens, otherwise subject to tax- 
ation.^ 

5. Deduction of Bona Fide Debts — From "No Credits,'^ etc., Includes 
National Bank Shares. — In the assessment and taxation of shares 
of national bank stock, the owners thereof, if they have no other 
credits or moneyed capital from which to deduct their bona fide 
debts, are entitled to deduct them from the assessed value of such 
shares of stock where the State statute provides that in the assess- 
ment and taxation of what is denominated credits, the individual 
taxpayer, as owner thereof, may deduct therefrom his bona fide 
debts, except debts of certain designated classes.* So where the 
State statute provides that the taxpayer's permitted deduction of 
indebtedness may be from his " credits or money at interest," 
from "all other demands against persons or bodies corporate," 
and from the " total amount of all credits," the shares in a national 
bank are covered by these terms so as to allow a deduction of in- 
debtedness therefrom." 

General Doctrine.- — Indeed, in general, a State law which per- 
mits individual citizens to deduct their just debts from the valua- 
tion of their personal property of every kind, other than national 
bank shares, or which permits the taxpayer to deduct from the 
sum of his credits, money at interest or other demands to the 
extent of his bona fide indebtedness, leaving the remainder to be 
taxed, while it denies the same right of deduction from the cash 
value of bank shares, operates to tax the latter at a greater rate 
than other moneyed capital.^ 

1. Hepburn v. School Directors, 23 suit further, Richards v. Rock Rapids, 
Wall. (U. S.) 480. 31 Fed. Rep. 505; Davenport Nat. 

2. Wasson v. First Nat. Bank, 107 IJank v. Mittelbuscher, 15 Fed. Rep. 
Ind. 206; s. c, 3 Nat. Bank Cas. 419. 225. 

3. Mercantile Nat. Bank w. Mayor etc. 4. Wasson v. First Nat. Bank, 107 
of N. Y., 121 U. S. 13S, 161; s. c, 3 Ind. 206; s. c, 3 Nat. Bank Cas. 419. 
Nat. Bank Cas. 243, 264; s. c, 18 Am. 6. Evansville Nat. Bank v. Britton, 
& Eng. Corp. Cas. 92, 112. See also 105 U. S. 322; s. c, 3 Nat. Bank Cas. 
as following this case, Davenport Nat. 48. 

Bank i:;. Davenport Board of Equaliza- 6. Bojer v. Boyer, 113 U. S. 689; 

tion, 123 U. S. 83; s. c, 18 Am. & Eng. s. c, 3 Nat. Bank Cas. 151. Sec also 

Corp. Cas. 154; s. c, 3 Nat. Bank Cas. People v. Weaver, 100 U. S.'539; s. c, 

285; National Bank v. Boston, 125 U. 2 Nat. Bank Cas. 57; Bressler t>. Wayne 

S. 60; s. c, 3 Nat. Bank Cas. 300; s. c, Co., 25 Neb. 468; s. c, 3 Nat. Bank 

20 Am. & Eng. Corp. Cas. 572. Con- Cas. 564; ». u., 25 Am. &. Eng. Corp. 

184 



Taxation. NATIONAL BANKS. Deductions in General. 

Rulings Under Doctrine. — To conform to this doctrine the value 
of stock in a national bank must be considered part of the "debts 
due or to become due " a taxpayer, from which he is entitled, by 
a State statute, to deduct the amount of his bona fide and uncon- 
ditional indebtedness, in listing his property for taxation.^ Pur- 
suant, also, to such doctrine, where a statute provides that in 
assessing solvent debts not secured by mortgage or trust deed, a 
deduction therefrom shall be made of " debts due to bona fide 
residents of the State," but does not allow a like deduction from 
■ the assessed value of national bank stock, such statute, so far as 
it denies the deduction to the holders of national bank stock, is 
in conflict with the act of congress.* 

6. Deductions in General — ValAe of Real Estate. — The National 
Bank act, while authorizing taxation of national bank shares, does 
not permit taxation of any property belonging to the bank 
except its real estate,^ and under the laws of the States, there is a 
want of uniformity in a tax against a national bank, if no pro- 
vision is made for the deduction of the value of the real estate 
from the aggregate value of the shares.* 

Investments in United States Bonds, etc. — But a statutory rule 
fixing the true money value of shares in national banks, which 
does not permit a deduction therefrom for the amount of United 
States bonds or other nontaxable securities held by the bank, has 
been sustained as not in conflict with the constitution of Ohio, 
nor with the law of congress authorizing taxation on such 
shares.^ 

. Cas. 301; McAden v. Mecklenberg 2. Miller v. Heilbron, 58 Cal. 133; 

Co., 97 N. Car. 355; o. c, 3 Nat. Bank o. c, 3 Nat. Bank Cas. 330. 

Cas. 694. Consult and compare Hills As to assessor's refusal to allow such 

V. National Albany Exch. Bank, 105 deductions, see Indianapolis v. Vajen, 

U. S. 319; s. c, 3 Nat Bank Cas. 45"; in Ind. 240; s. c, 18 Am. & Eng. 

reversing National Albany Exch. Bank Corp, Cas. 146, 150. As to selectmen's 

V. Hills, 5 Fed. Rep. 248; s. c, 2 Nat. like refusal, see Peavey v. Town of 

Bank Cas. 456*; Stanley t'. Albany Co., Greenfield, 64 N. H. 284; cititiff Vf es- 

121 U. S. 535; s. c, 3 Nat. Bank Cas. ton v. Manchester, 62 N. H. 

268;Rosenberg v. Weekes, 67 Tex. 578; 3. Covington City Nat. Bank v. Cov- 

s. c, 18 Am. & Eng. Corp. Cas. 140; ington, 21 Fed. Rep. 484. 

Whitbeck v. Mercantile Nat. Bank, 167 4. City Nat. Bank v. Paducah, 2 

U. S. 193; s. c, 3 Nat. Bank .Cas. 309; Flip. 61; s. c, i Nat. Bank Cas. 300, 

s. c, 20 Am. & Eng. Corp. Cas. 5S2, holding that there is double taxation in 

587; City Nat. Bank v. Paducah, 2 such a case. See also Rice Co. Citizens' 

Flip. (U. S.) 61; s. t,., I Nat. Bank Cas. Nat. Bank, 23 Minn. 280; s. c, i Nat. 

300; Maguire v. Board of Revenue, 71 Bank Cas. 629, 630; Lancaster Co. v. 

Ala. 401; s. c, 6 Am. & Eng. Corp. Lancaster Co. Nat. Bank, 7 W. N. C. 

Cas. 452; First Nat. Bank v. St. Jo- (Pa.) 29, 31; o. c, 2 Nat. Bank Cas. 

seph, 46 Mich. 526; McVeagh v. 415; People v. Commrs. of Taxes, 69 

Chicago, 49 111. ^18; s. c, i Nat. Bank N. Y. 91; s. c, i Nat. Bank Cas. 752, 

Cas. 381: Richards v. Rock Rapids, 7153; Matter of Farmers' Nat. Bank, i 

31 Fed. Rep. 505; National Albany Thomp. & C. (N. Y.) 383; Peoole v. 

Exch. Bank t;. Wells, 18 Blatchf. (U. Commrs. of Taxes, 80 N. Y. 573. 

S.) 478; People V. Ryan, 88 N. Y. 5. Exchange Nat. Bank v. Miller, 19 

142. Fed. Rep. 372. See also People n. 

1. Ruggles V. Fond du Lac, 53 Wis. Commrs. of Taxes etc., 4 Wall. (U. S.) 

436. - 244; s. c, I Nat. Bank Cas. 9. 

185 



Taxation. NATIONAL BANKS. Inequalities. 

7. Inequalities in Valuation, etc. — Where Fixed Percentage the 
Same. — The words, " at a greater rate than is assessed upon other 
moneyed capital in the hands of individual citizens," used in the 
National Bank act, refer to the entire process of assessment, which, 
in the case of national bank shares, includes both their valuation 
and the rate of percentage on such valuation,^ so that the act of 
congress is violated^ if in connection with a fixed percentage 
applicable to the valuation alike of national bank shares and of 
other moneyed investments of capital, the State law establishes 
or permits a mode of assessment by which such shares are valued 
higher in proportion to their real value than is other moneyed 
capital.^ 

Relief in Equity Against Discrimination. — When the inequality 
of valuation is the result of a State statute which is designed to 
discriminate injuriously against any class of persons or species of 
property, a court of equity will give appropriate relief.* 

Inequality in Rule of Valuation. — So the court will give relief 
where, though the law itself is unobjectionable, the officers who are 
appointed to make assessments combine together and establish a 
rule or principle of valuation, the necessary result of which is to 
tax one species of property higher than others, and higher than 
the average rate.^ But the rule must be applied not solely to 
one individual but to a large class of individuals or corporations,** 
and no relief will be granted where the bill alleges no such agree- 
ment or common action of assessors, and no general rule or dis- 
criminating rate adopted by a single assessor, but relies on 
numerous instances of partial and unequal valuations which es- 
tablish no rule on the subject.'' 

Adoption of Most Practicable Mode of Valuation. — Nor is the 
assessment invalid merely because all bank shares were assessed 
at par, where any discrimination that may have existed arose 
from the difficulty of devising any other mode of assessment 
which would work out greater equality and uniformity in the 
valuation of different kinds of moneyed capital.® 

Inequalities Must Indicate Intentional Discrimination. — Indeed, 
inequalities in valuation afford no ground for relief, unless it be 
J 

1. See People v. Weaver, too U. S. 103 U. S. 732; s. c, 3 Nat. Bank Cas. 9. 
539; s. c, 2 Nat. Bank Cas. 57. 5. German Nat. Bank v. Kimball, 103 

2. See Pelton -u. Commercial Nat. U. S. 732; ». i;., 3 Nat. Bank Cas. 9, 12. 
Bank, 101 U. S. 143; ». t., 2 Nat. Bank 6. Cummings v. Merchants' ISfat. 
Cas. 85. Bank, loi U. S. 153; s. c, 2 Nat. Bank 

3. Beyer v. Beyer, 113 U. S. 6S9; s. c, Cas. 74, 78. 

3 Nat. Bank Cas. 151. As to statute 7. German Nat. Bank v. Kimball, 

not objectionable for want of proper- just cited. See also Hills v. National 

tion, see Providence Inst. v. Boston, loi Albany Exch. Bank, 105 U. S. 319; s. c, 

Mass. 575; s. c, 3 Am. Rep. 407; s. c, 3 Nat. Bank Cas. 45; Wagoner v. 

I Nat. Bank Cas. 578. As to imposi- Loomis, 37 Ohio St. 571. 

tion of higher percentage on national 8. Williams v. Albany Co., 122 U. S. 

banks, see First Nat. Bank ti. Lucas Co., 154; s. i.., iS Am. & Eng. Corp. Cas. 

25 Fed. Rep. 749. 133; s. c, 3 Nat. Bank Cas. 278; aflirm- 

4. German Nat. Bank t>. Kimball, ing 21 Fed. Rep. 99. 

186 



Taxation. NATIONAL BANKS. Place of. 

made to appear that they result not merely from error in judg- 
ment on the part of the assessing officer, but that there was in- 
tentional discrimination, which may be established by proof of 
inequalities so gross as to lead the court to the conclusion that 
they were designed.' 

8. Place of Taxation — Place of Location of Bank. — Soon after 
the passage of the National Bank act, a controversy arose as to 
the true meaning of the clause which permitted shares to be 
taxed under State authority " at the place where the bank is 
located and not elsewhere." In some of the States it was held** 
that the restriction confined the exercise of the taxing power to 
the town or district in which the corporation conducted its busi- 
ness. But in others it was decided that the clause in question 
applied to the State and not to any of its territorial divisions, 
and that such tax could be assessed upon a resident stockholder 
at the place of his residence* wherever it might be within the 
State.* The controversy was solved by an amendatory act, 
passed in 1868, declaring the word " place " to mean the " State " 
wherein the bank is located.^ The only restraints imposed upon a 
State, under the altered wording of the enactment in the exercise 
of its taxing power over shares in national banks, have been con- 
sidered to be : (i) That such tax shall not be at a greater rate 
than is assessed upon other moneyed capital in the hands of the 
individual citizens of the State. (2) That the tax on shares of 
nonresident owners shall be imposed in the city or town® where 
the bank is located. '^ Subject to these limitations, it is left to the 
legislature of a State to " determine and direct the manner and 
place of taxing all the shares " of banking associations within its 

1. Exchange Nat. Bank v. Miller, 19 grounds in Austin v. Aldermen, 7 Wall- 
Fed. Rep. 372. Compare First Nat. (U. S.) 694, or i Nat. Bank Cas. 15, 
Bank v. Lucas Co., 25 Fed. Rep. 16; Clapp v. Burlington, 42 Vt. 579; 
749. s. c, noted i Nat. Bank Cas. 938; s. c, 

Inequalities in General. — Valuation i Am. Rep. 355; Markoe t'. Hartranft, 6 

alleged to be made with regard to Am. L. Reg., N. S. 487, 490. 

wrong date. McVeagh v. Chicago, 49 4. Smith, C. J., in Buie v. Fayette- 

111. 318; s. c, I Nat. Bank Cas. 381. ville, 79 N. Car. 267; s. i;., 2 Nat. Bank 

2. See Opinion of the Justices, 53 Me. Cas. 343. But the State could not tax 
594; Abbott t'. Bangor, 54 Me. 540; s.c, shares owned by its residents in a 
noted I Nat. Bank Cas. 933; Packard national bank located in another State. 
V. Lewiston, 55 Me. 456; s. c, noted Flint v. Board of Aldermen, 99 Mass. 
I Nat. Bank Cas. 933 (affirmed in Ab- 141; s. c, i Nat. Bank Cas. 571, 572; 
bott V. Bangor, 56 Me. 310; o. <_., noted, s. c, 96 Am. Dec. 713. 

I Nat. Bank Cas. 934). Consult also 5. See First Nat. Bank v. Smith, 65 

reference in Austin v. Board of Alder- 111. 44; s. c, i Nat. Bank Cas. 390; City 

men, 14 Allen (Mass.) 359, to a ruling Nat. Bank v. Paducah, 2 Flip. (tl. S.) 

in New Hampshire in the case of First 61; s. c, \ Nat. Bank Cas. 300. 

Nat. Bank v. Portsmouth. Compare 6. See People v. Moore, i Idaho 

further Utica v. Churchill, 33 N. Y. (U. S.) 504. 

161; State V. Haight, 31 N. J. L. 399; 7. See Kyle f. Mayor of etc. Fayette- 

State V. Hart, 31 N. J. L. 434. ville, 75 N. Car. 445; s. c, i Nat. Bank 

3. Austin V. Board of Aldermen, 14 Cas. S08. Compare First Nat. Bank 
Allen (Mass.) 359; s. c, noted i Nat. v. Smith, 65 111. 44; s. c, i Nat. Bank 
Bank Cas. 934; s. c, affirmed on other Cas. 390. 

187 



Taxation. 



NA TIONAL BANKS. 



Place of. 



limits.^ It follows, therefore, that a State may, under the re- 
straints mentioned, prescribe and regulate as well the place as the 
manner of making its assessments upon this kind of property ac- 
cording to its own discretion.^ 

Owner s Residence Immaterial. — Indeed, a State legislature may 
provide for the taxation of the owne/s of national bank shares at 
the particular place within the State where the bank is located,* 
without regard to the places of residence of the owners,* whether 
at such place, or elsewhere within the State, or entirely outside 
of the State.* But an assessment of a tax on the stock of a 
national banking association in Neiv Jersey, which stock is owned 
by a stockholder residing in the city in which the association is 
located, cannot be sustained by the presumption that the stock- 
holder resided in the ward in which the association was located.® 



1. U. S. Rev. Stats., § 5219. 

2. Smith, C. J., in Buie ». Fayette- 
ville, 79 N. Car. 267; s. c, 3 Nat. Bank 
Cas. 343. 

3. See Providence Inst. v. Boston, loi 
Mass. i;75; s. c, 3 Am. Rep. 407; s. u., 
I Nat. Bank Cas. 57S. 

4. See Mclver v. Robinson, 53 Ala. 
456; s. c, I Nat. Bank Cas. 372; State 
V. Cook, 32 N. J. L. 347. 

6. Tappan v. Merchants' Nat. Bank, 
19 Wall. (U. S.) 490; s. c, I Nat. Bank 
Cas. 100. Tlie ruling in this case is re- 
ferred to in Williams v. Weaver, 75 N. 
Y. 30. See to same effect. First Nat. 
Bank v. Smith, 65 111. 54; s. c, i Nat. 
Bank Cas. 390; Baker v. First Nat. 
Bank, 67 111. 297; Curtis v. Ward, 58 
Mo. 295; s. c., noted i Nat. Bank Cas. 
935. Compare Whitney v. Ragsdale, 
33 Ind. 107; s. c, 5 Am. Rep. 185; s. c, 
I Nat. Bank Cas. 429. Contra, Union 
Nat. Bank v. Chicago, 3 Biss. (U. S.) 82. 

Extra-State National Bank as Owner. 
— It is immaterial that the owner of 
national bank shares subjected to tax- 
ation in one State is a national bank 
and not an individual located in anoth- 
er State. National Bank w. Boston, 125 
U. S. 60; s. c, 3 Nat. Bank Cas. 300; 
s. c, 20 Am. & Eng. Corp. Cas. 572. 

6. State V. Newark, 40 N. J. L. 55S; 
a. c, 2 Nat. Bank Cas. 290, reversing 
same case, 39 N. J. L. 380, or i Nat. 
Bank Cas. 672. 

IVIistake as to Town of Owner's Resi- 
dence. — An owner of national bank 
shares is, in Massachusetts, rightfully 
taxed upon them in the town in which 
she resides, although in a statement 
made under the local statue, she has by 
an honest mistake notified the cashier 
of the bank that her residence is in a 



different town. Goldsbury v, Warwick, 
112 Mass. 384; s. c, I Nat. Bank Cas. 

592- 

Legislation as to Township of Tax- 
ation. — The legislation of Michigan is 
valid, which provides for the' taxation 
of national bank stock in the township 
where the bank is located, except that 
where a stockholder resides in another 
township in the same county, he is tax 
able in his own township. Howell v. 
Cassopolis, 35 Mich. 471; s. c, i Nat. 
Bank Cas. 627. 

Changes in Tennessee Statute. — In 
Tennessee, before the act of March ist, 
1869, bank stocks, whether in national 
or other banks, were taxable only in 
the county of the owner's residence. 
Mayorof Nashville ■Z'. Thomas, 5 Coldw. 
600; s. c, noted i Nat. Bank Cas. 93S; 
Union Bank v. State, 9 Yerg. (Tenn.) 
490. But section 9 of that act changed 
the law in this regard, and made them 
taxable at the place where the bank 
might be situated. McLaughlin v. 
Chadwell, 7 Heisk. (Tenn.) 389; s. c, 
noted I Nat. Bank Cas. 938. 

In General. — Mode of assessment in 
Ne-iu Tork where owner does not re- 
side in ward where bank iiS located. 
McMahon v. Palmer, 102 N. Y. 176; 
s. c, 55 Am. Rep. 796; s. u., 12 Am. 
& Eng. Corp. Cas. 297; s. c, 3 Nat. 
Bank Cas. 636, 638-39. Taxation 
for fire, district purposes, in Massa- 
clmsetts. Rich v. Packard Nat. Bank, 
13S Mass. 527. For school district 
purposes. Little r<. Little, 131 Mass. 
367. Question concerning validity of 
statute for taxing elsewhere than at 
place of location of bank, held not 
raised in Wait v. Dowley, 9^ U. S. 527; 
s. >.., I Nat. Bank Cas. 137. 



188 



Taxation. 



NATIONAL BANKS. 



Limits of. 



9. Limits of Taxation — Shares Taxable Above Par Value. — 
National bank shares may be taxed at an amount above their par 
value. ^ 

On Shares in Name. — The tax imposed must, however, be upon 
the shares in name.** 

No Assessment on Personal Property as Such. — But no revenue 
can be collected by a State, county, or municipality from national 
banks, except by assessments upon their shares and real estate ;* 
and an assessment on personal property, apparently based on the 
capital stock, is illegal.* 

Shares of National Bank Located in a Territory Are Taxable. — 
The shares of national banks located and doing business in a 
Territory are subject to taxation as well as those of like banks 
established in a State." 

Taxation of Surplus Capital. — And where the shares of national 
banks are by statute required to be taxed at their par value, the 
surplus fund of such banks, in excess of the amount they are 
required by law to keep on hand, has been held taxable by the 
States in which the banks are located.® 

New Shares Before Comptroller s Approval of Increase of Cap- 
ital Stock. — But new shares of a national bank are not the sub- 
ject of taxation before the comptroller of the currency has 
approved the increase of the capital stock. '^ 



Conducting Business In Anotber State. 

— A national bank located in Neiu Jer- 
sey, which kept a clerk in Philadelphia 
to receive deposits for the convenience 
of persons in that city, did not become 
located in Pennsylvania so as to be 
taxable there. National State Bank v. 
Pierce, i8 Abb. L. J. i6; ». c, 2 Nat. 
Bank Cas. 177. 

1. Hepburn v. School Directors, 23 
Wall. (U. S.) 480; s. c, I Nat. Bank Cas. 
113; People V. Commrs. of Ta.tes, 94 
U. S. 415; s. c, I Nat. Bank Cas. 130. 
Contra. Union Nat. Bank v. Chicago, 
3 Biss. U. S. 82. 

2. People V. Moore, i Idaho (U. S.) 
■504. 

3. See National Commercial Bank v. 
Maj'or etc. of Mobile, 62 Ala. 284; s. c, 
34 Am. Rep. 15; s. c, 2 Nat. Bank Cas. 
440. 

4. National State Bank v. Young, 25 
loiva 311; b. c, : Nat. Bank Cas. 451, 

45^- 

Nor can a tax on shares of national 
banks be authorized by a State statute 
where the laws of the State merely pro- 
vide for the taxation of the capital 
stock of its own banks, and not of the 
shares held therein. Hubbard v. John- 
son' Co., 23 Iowa 130. As to new statute 
with valid provisions for taxing national 



banks, see Morseman v. Younkin, 27 
Iowa350,352; s.c, i Nat. Bank Cas. 460. 
In Texas, under the revised statutes 
of 1879, """^ ""^^^ estate of national 
banks could not be taxed. Rosenberg v. 
Weekes, 67 Tex. 578; s. c, 18 Am. & Eng. 
Corp. Cas. 140. In Maryland, a tax not 
only on the shares of a national bank 
but also on the banking house, lot and 
furniture is illegal. Frederick Co. v. 
Farmers' etc. Nat. Bank, 48 Md. 117- 
119, et seq.; s. c, 2 Nat. Bank Cas. 252, 
et seq. 

5. Silver Bow. Co. v. Davis, 6 Mont. 
306; s. c, 3 Nat. Bank Cas. 546; Salt 
Lake City Bank v. Golding, 2 Utah i; 
People V. Moore, i Idaho (U. S.) 504. 

6. First -Nat. Bank v. Peterborough, 
56 N. H. 38; s. c, 22 Am. Rep. 416; s. 
c, I Nat. Bank Cas. 6i;8. See also 
Strafford Nat. Bank v. Dover, 58 N. 
H. 316; s. c, 2 Nat. Bank Cas. 296; 
Concord Bank v. Concord, 59 N. H. 
75; State t'. Newark, 39 N.j L. 380; 
s. c, I Nat. Bank Cas. 672 (s. c, on 
appeal, 40 N. J. L, 558, or 2 Nat. Bank 
Cas. 290). But see Covington City 
Nat. Bank v. Covington, 21 Fed. Rep. 
484. 

7. Charleston v. Peoples' Nat. Bank, 
5 S. Car. 103; s. c, 22 Am. Rep. 1, 4; 
s. c, I Nat. Bank Cas. 898. 



189 



Taxation. NATIONAL BANKS. Exemptions from. 

10. Exemptions from Taxation in General — Under Proviso Requir- 
ing Like Taxation of State Banks. — The proviso, in the National 
Bank act, that the tax imposed by State laws on shares in national 
banks "shall not exceed the rate imposed upon the shares in any 
of the banks organized under the authority of the State where 
such association is located," which has reference to State banks 
of issue, did not exempt national bank shares from taxation, if 
the State complied with the proviso so far as it had the ability to 
do so.^ 

Where City Banks Exempted Under Abrogated Ordinance. — 
And an asserted exemption of interest bearing bonds of a city 
from municipal taxation, under an ordinance of the city which was 
abrogated by subsequent legislation, does not operate to exempt 
from like taxation the shares in a national bank located in the 
same city.^ 

Personal Property of Insolvent National Bank. — The personal 
property of an insolvent national bank, in the hands of a receiver, 
under the provision of National Bank act, is, however, exempt 
from taxation under State laws.^ 

Where Corporation Required to List Property for Taxation. — 
A statutory exemption of "all shares of the capital stock of any 
company or corporation which is required to list its property for 
taxation," has. been held inapplicable to national bank shares.* 

Circulating Notes. — The circulating notes of national banks, 
known as "national currency," are likewise not exempt from tax- 
ation by a State.'' 

1. Lionberger v. Rouse, 9 Wall. (U. vency of bank. Woodward v. Ells- 
S.) 468; s. c, I Nat. Bank Cas. 41; ex- worth, 4 Colo. 5S0; s. c, 2 Nat. Bank 
plained in Boyer v. Bover, 113 LF. S. Cas. 2i6; and further as to taxation of 
689; s. t., 3 Nat. Bank Cas. 151. See insolvent national bank, Jackson v. 
further concerning this former proviso United States, 20 Ct. of CI. 298. 

of the act, Mercantile Nat. Bank v. 4. Mclver v. Robinson, 53 Ala. 456; 

Mayor etc. of N. Y., 131 U. S. 138; s. s. c, i Nat. Bank Cas. 372. 

c, 3 Nat. Bank Cas. 243; Van Allen v. 6. Montgomery Co. v. Elston, 32 

Assessors, 3 Wall. (U. S.) 573, 5S1; s. u., Ind. 27; s. c, 2 Am. Rep. 327; s. c, i 

I Nat. Bank Cas. i, 2; Richmond v. Nat. Bank Cas. 425. See also Lilly v. 

Scott, 48 Ind. 568; s. c, I Nat. Bank Commrs., 69 N. Car. 300; RuflRn v. 

Cas. 445; Van Slyke v. State, 23 Wis. Board of Commrs., 69 N. Car. 498; s. 

655; s. c, noted i Nat. Bank Cas. 939; c, i Nat. Bank Cas. 806. Contra, 

affirmed in Bagnall v. State, 25 Wis. Home v. Green, 52 Miss. 452; s. i,., i 

112; Frazer v. Siebern, 16 Ohio St. Nat. Bank Cas. 643. 

614; s. c, noted i Nat. Bank Cas. 936; Tax on Municipal Notes Paid Out. — 

Smith V. Webb, 11 Minn. 500; s. c, The provision of the Revised Statutes 

noted I Nat. Bank Cas. 935; Hubbard is not unconstitutional whereby it is 

V. Johnson Co., 23 Iowa 130; s. u., noted enacted that ever3' national banking as- 

I Nat. Bank Cas. 932. sociation . . shall pay a tax of 

2. Adams v. Nashville, 95 U. S. 19; ten per centum on the amount of notes 
s. i;., I Nat. Bank Cas. 148; stated in of any town, city, or municipal corpo- 
Bo3'er v. Beyer, 113 U. S. 689; s. t., 3 ration paid out bv them." Merchants' 
Nat. Bank Cas. 151. Nat. Bank v. United States, loi U. S. 

3. Rosenblatt r. Johnson, 104 U. S. i; s. c, 2 Nat. Bank Cas. 439; following 
462; ». c, 3 Nat. Bank Cas. 32. See Veazie Bank v. Fenno, 8 Wall. (U. S.) 
also as to levy subsequently to insol- 533; s. c, i Nat. Bank Cas. 22. 

100 



Taxation. NATIONAL BANKS. Beslriotions TTpon. 

11. Restrictions Upon Municipal Taxation — Municipal Officers Must 
Have State Law as Authority. — Before municipal officers can 
rightly assess a tax upon the shares of national banks, they must 
be authorized to do so by some law of the State. ■• 

Where No Like Tax Imposed on State Banks. — And as the act 
of congress forbids any discrimination against the shares of 
national banks in taxation, such shares cannot be taxed by a 
State for municipal purposes or otherwise, where no such tax is 
imposed upon the State bank or upon other banks organized 
under the authority of the State.^ 

No Tax Upon Business, etc. — National banks are not liable to a 
privilege tax imposed by a city ordinance ;* nor, in view of the 
fact that the shares alone are taxable, to any tax upon their busi- 
ness, imposed by the municipal authorities of the city where the 
baikis located.* 

12. Mode of Assessment — Without Personal Examination by 
Assessor. — Where a party was assessed upon national bank shares, 
the number and estimated value of which was furnished by him 
to the assessment officers, and such officers, upon the information 
thus obtained, with that derived from other sources, appraised 
the shares at their actual value, it was held that personal exam- 
ination by the officers was not necessary, under the New York 
statute, as the requirement of such examination under that statute 
applied to real estate only." 

Entry on Separate List or Book. — Nor is the assessment ren- 
dered void because it is entered upon a list or book separate from 
other assessments for personal property against individuals in the 
same city.^ 

1. Stetson iy. Bangor, 56 Me. 274; s. licence fee from a national bank. Carth- 
c, I Nat. Bank Cas. 520. But munici- age v. First Nat. Bank, 71 Mo. 508; s. 
pie taxes were held to be imposed by c, 36 Am. Rep. 494; s c, 2 Nat. Bank 
State authority on national bank shares Cas. 279. But the ordinance, though 
in McLaughlin v. Chadwell, 7 Heisk. unconstitutional, may not give a right 
(Tenn.) 389; s. c, noted i Nat. Bank to equitable relief by injunction. Sec 
Cas. 938. ■ As to tax — held not levied ond Nat. Bank v. Caldwell, 13 Fed. 
for municipal purposes, in Indiana. See Rep. 429. As to exemption of furni- 
Root V. Erdelmeyer, 37 Ind. 225; s. c, ture and real estate of a national bank 
I Nat. Bank Cas. 432. from taxation m Kentucky, see Cov- 

2. Craft V. Tuttle, 27 Ind., 332; s. c, ington Citj' Nat. Bank v. Covington, 
noted I Nat. Bank Cas. 932; Wright v. 21 Fed Rep. 484. And as to invalidity. 
Stiltz, 27 Ind. 338. See also Evans- in same State, of ad valorem taxes 
viUe V. Bayard, 39 Ind. 450; s. c, noted levied on the banking-house and lot of 
I Nat. Bank Cas. 933. But compare a national bank, see City Nat. Bank v. 
Richmond v. Scott, 48 Ind. 568; s. c, i Paducah (Ky. 18S8), 9 S. W. Rep. 21S; 
Nat. Bank Cas. 445, followed in Stilz s. c, 27 Cent. L.J. 398. 

V. Tutewiler, 48 Ind. 600; s c, noted i 5. McMahon v. Palmer. 102 N. Y. 

Nat. Bank Cas. 932. 176, 182; s.c, 3 Nat. Bank Cas. 636, 638'. 

3. National Bank of Chattanooga v. s. c, on other points, 55 Am. Rep. 796. 
Mayoretc.,8Heisk.(Tenn.) 814,815,816. s.c, 2 Am. & Eng. Corp, Cas. 297, 29S- 

4. Mayor etc. of Macon z'. First Nat. 99, affirming 11 Daly (N. Y.) 214, and 
Bank, 59 Ga. 648. See also Pittsburgh treating this view of the statute as as ■ 
i/. First Nat. Bank, 55 Pa. St. 45; s. c, sumed in Brevoort v. Brooklyn, 8g N. 
noted I Nat. Bank Cas, 936. A city, Y. 128. 

therefore, has no power to exact a 6. McMahon v. Palmer, 102 N. Y. 

191 



Taxation. 



NA TIONAL BANKS. 



Inspecting Powers. 



Curing Irregularities. — Irregularities, in the mode of assess- 
ment, may be cured by a validating act.^ 

Listing of Shares. — But there is no authority in the statutes of 
Ohio nor of the United States for listing and valuing the shares 
in a national bank in the aggregate, and placing such aggregate 
on the tax list in the name of the bank.^ 

13. Inspecting Powers of State Authorities, etc. — Production of 
Books by National Bank. — Neither restrictions upon visitorial 
power, contained in the National Bank act, nor other considera- 
tions as to the exposure of private business, etc., preclude the 
enforcement by the State courts of an order for the production 
of its books by a national bank, to determine whether any 
deposits therein are liable to escape taxation.** 

Refusal to Furnish List of Shareholders, etc. — But the fact that 
the officers of a national bank violate the law by refusing to 
furnish the assessor with a list of the shareholders, does not au- 
thorize him to make an assessment otherwise than against the 
stockholders personally.* 

14. Collection of Taxes on Shares — Seizure of Property of Bank. 
— An assessment against a shareholder in a national bank does 
not, in Iowa, authorize the seizure of the property of the bank to 
satisfy such assessment ;^ but the statute of Nebraska expressly 



176; o. c, 3 Nat. Bank Cas. 636; s. c, 
55 Am. Rep. 796; s. c, 12 Am. & Eng. 
Corp. Cas. 297, holding (102 N. Y. 184) 
that such mode of registering the assess- 
ment does not contravene the provision 
of the U. S. Rev. Stat, which permits 
the inclusion, for purposes of State as- 
sessment of taxes, of shares of national 
banks in the valuation of the owner's 
personal property. 

The opinion distinguishes Albany 
City Nat. Bank v. Maher, 19 Blatchf. 
(U. S.) 175, as applicable only to cases 
where the assessment of both real and 
personal property is required by statute 
to be made on the same book or roll; 
and rehes upon Foster v. Van Wyck, 2 
Abb. App. Dec. (N. Y.) 167, which re- 
lates to the judicial character of the 
• action of the assessing officers; and upon 
Williams v. Weaver, 75 N. Y.30, which 
considers an assessment of national 
bank shares not invalid because their 
valuation was placed in a separate item, 
atid Itself relies upon People v. Dolan, 
36 N. Y. 59 (by Parker, J., whose opin- 
ion Is not given in 1 Nat. Bank Cas. 684) . 
1. Williams f. Albany Co., 122 U.S. 
154; s. c , iS Am. is, Eng. Corp. Cas. 
133; s. c, 3 Nat. Bank Cas. 278, affirm- 
ing 21 Fed. Rep.gg. For validating act 
held void, see Albany City Nat. Bank 
V. Maher, 20 Blatchf." CU. S.) 341, 



2. Miller v. First Nat. Bank, 46 Ohio 
St. 424; s. c, 25 Am. & Eng. Corp. Cas. 
289; s. c, 3 Nat. Bank Cas. 711. 

Irregularities in Mode of Assessment. 
— See First Nat. Bank v. St. Joseph, 46 
Mich. 526; Mc Veagh -u. Chicago, 49 111. 
318; s.'c, I Nat. Bank Cas. 381; Nick- 
erson v. Kimball, i Chic. Law. J. 42; s. 
c, I Nat. Bank Cas. 409. 

Jurisdiction of Assessors, etc.— See 
National Bank -u. Elmira, 53 N. Y. 49; 
s. c, I Nat. Bank Cas. 715. 

3. First Nat. Bank v. Hughes, 6 Fed. 
Rep. 737; s. c, otherwise noted, 2 Nat. 
Bank Cas. 176. 

4. Springfield v. First Nat. Bank, 87 
Mo. 441; s. c, 14 Am. & Eng. Corp. 
Cas. 342; s. c, 3 Nat. Bank Cas. 524. 
See also, as to validity of State statute 
requiring list of shareholders to be fur- 
nished, Waite V. Dowley, 94 U. S. 527; 
s. c. I Nat. Bank Cas. 137. 

As to defective declaration against 
national bank cashier for refusing to 
permit collector of proper district to 
examine bank checks, see United States 
,t'. Mann, 95 U. 8. 580; s. c, i Nat. Bank 
Cas. 154. 

5. First Nat. Bank v. Hershire, 31 
Iowa 18; s. c, I Nat. Bank Cas. 465. 

Under the statute of that State, a na- 
tional bank is not liable for the tax as- 
sessed against a shareholder unless it 



193 



Stock and Stockholders. NA TIONAL BANKS. la General. 

provides that the taxes on the shares " shall be paid by the bank," 
and their collection by distraint is upheld by the federal court. ^ 

Remedy Where Collection, Enforced Against Bank. — In Missouri 
it is held that, under the National Bank act, the county collector 
should make the assessment against the shareholders personally, 
and has no right to collect the tax by selling the property of the 
bank or the shares or other property of nondelinquent sharehold- 
ers ;* but that, if he does so, the proper remedy is not an injunction 
on behalf of the bank.^ In New York, however, it is ruled that 
an assessment upon the capital stock of a national bank and a tax 
against the bank, in violation of the State statute, which pro- 
hibits the assessment of a tax upon such capital stock, is void, 
and that an action will lie on behalf of the bank against a muni- 
cipal corporation to recover the amount collected by it upon such 
an assessment for municipal taxes.* 

Vin. Stock and Stockholdees — 1. Stockholders in General — Of 
Bank Which Has Gone Into Liquidation. — Where a national bank 
has gone into voluntary liquidation, in pursuance of the vote of 
all its stockholders, and all but one of them have united in organ- 
izing a new national bank under a different name, and the omitted 
stockholder has accepted dividends from the proceeds of nearly 
the entire assets of the new bank, he cannot claim to be a stock- 
holder in the new bank nor a right to share in its earnings." 

Appraisal of Shares, etc. — -A committee appointed under the 
provisions of the act of congress of July I2th, 1882, to appraise 
the value of the shares of stockholders of a national bank who do 



have under its control dividends or prop- Mo. 500. See also Springfield t>. First 

erty belonging to such shareholder. Nat. Bank, 87 Mo. 441; s. c, 14 Am. & 

Hershire v. First Nat. Bank, 35 Iowa Eng. Corp. Cas. 342, 344-45; s. 1.., 3 

272; s. c, I Nat. Bank Cas. 476. Nat. Bank Cas. 524, holding that the re- 

1. First Nat. Bank t'. Douglas Co., 3 fusal of the officers of the bank to fur- 
Dill. (U. S.) 330; s. u. I Nat. Bank Cas. nish the assessor with a list of share- 
268, 271. ' holders does not justify making and 

A statute of Kentucky, requiring the enforcing the assessment against the 

cashier of a bank whose stock is taxed property of the bank. See Cook on 

to pay the amount of the tax due, was Stock, § S72«. 

held valid as a tax on the shares, in 3. First Nat. Bank -'. Meredith, 44 

First Nat. Bank v. Com., g Wall. (U. Mo. 500. 

S.) 353; s. t., I Nat. Bank Cas. 34. 4. National Bank t'. Elmira, 53 N. Y. 

Apparently affirming, Com. v. First ^qeispq.; ». c, i Nat. Bank Cas. 715 

Nat. Bank, 4 Bush (Ky.) 98; b. c, ci seg. 

96 Am. Dec. 285; and followed as to a Irregularities In Collection. — See First 

less exacting statute of Vermont in Nat. Bank v. St. Joseph, 46 Mich. 526; 

Waite V. Dowley, 94 U. S. 527; s. c, i McVeagh v. Chicago, 49 III. 31S; s. i,., 

Nat. Bank Cas. 137. See also, as tore- i Nat. Bank Cas. 381; Weld X'. Bangor, 

quirenient that tax be paid by the cor- 59 Me. 416; s. i;., i Nat. Bank Cas. 521. 

porations instead of by the shareholders, Lien on Shares. — As to lien on na- 

Lionberger v. Rouse, 9 Wall. (U. S.) tional bank shares, continuing until 

46S; s. c, I Nat. Bank Cas. 41, and as ta.Kes paid, under Wisconsin law, see 

to N. Y. doctrine, First Nat. Bank v. Simmons v. Aldrich, 41 Wis. 241; s. c, 

Fancher, 48 N. Y. 524; s.c, I Nat. Bank i Nat. Bank Cas. 921. 

Cas. 697. 5. First Nat. Bank v. Marshall, 26 III. 

2. First Nat. Bank v. Meredith, 44 App. 440. 

16 C. of L.— 13 193 



stock and Stockholders. NA TIONAL BANKS. Bights of. 

not assent to amendments to the articles of association, and who 
have signified their intention to withdraw, may amend a mere 
clerical error in their award, at any time before appeal therefrom 
to the comptroller of the currency, although the shareholder has 
been notified of the award, and has accepted it in its original 
form.^ 

2. Eights of Stockholders — Inspection of Books and Papers. — The 
Alabama statute giving to the stockholders of private corpora- 
tions reasonable access to the books and papers of such corpora- 
tions, and inspection and examination thereof, applies to national 
banks located within the State, and is not in conflict with the 
federal provision restricting visitorial powers over national banks.* 

Right of Action. — A stockholder in a national bank cannot 
maintain an action against the president and directors for their 
neglect and mismanagement of the affairs of the bank, whereby 
insolvency ensued and the stock became worthless.* 

3. Stockholder's Sight to Vote — Only Stockholders of Record at 
Time of Proceeding to Wind Up. — Shares of stock in a national 
bank cease to be transferable as such upon its proceeding, at the 
end of the original period for which it was organized, to wind up 
its affairs under the statutory provision therefor;* and only stock- 
holders of record at that time have the right to vote for directors 
to settle its affairs, or are eligible for election as such.^ 

Liability Disqualifying from Voting.— T^iQ past due and unpaid 
liability of a shareholder, which, under the National Bank act, dis- 
qualifies him from voting at an election of directors of a national 
bank, is limited to his liability for unpaid subscriptions to stock.® 

4. Liabilities of Stockholders — For Costs. — In proceedings against 
the stockholders of a national bank that has gone into liquidation 
to ascertain and recover assessments for indebtedness, the stock- 
holders are liable for costs as if they were codefendants in any 
ordinary action. '^ 

1. First Nat. Bank w.Brenneman, 114 stockholder who has been forced to 
Pa. St. 315. meet his individual liability may main- 
Suits Concerning. — As to bill in equity tain an action on behalf of the stock- 

against stockholders, see Richmond v. holders in general against the directors 

Irons, 121 U. S. 27; s. c, 3 Nat. Bank for losses resulting in the insolvency of 

Cas. 211. As to want of authority for suit the bank, and due to their negligence 

by receiver at same time, see Harvey v. and misconduct, if the receiver refuses to 

Lord, II Biss. (U. S.) 144. As to bill by bring such action and the comptroller' 

stockholder against president and di- of the currency refuses to sanction the 

rectors, see Ackerman v. Halsey, 37 N. action. Nelson v. Burrows, 9 Abb. N. 

J. Eq. 356; s. u. I Am. & Eng. Corp. Cas. (N. Y.) 280. 

Cas. 239. 4. U. S. Stat, of July 12th, 1882, 

2. Winter v. Baldwin, 89 Ala. 483. § 7. 

3. Conway T). Halsey, 44 N. J. L. 462; 5. Richards v. Attleborough Nat. 
s. c, 3 Nat. Bank Cas. 571. But a stock- Bank, 14S Mas*. 187; s. c, 3 Nat. Bank 
holder of a national bank was held to Cas. 495. 

have legal capacity to sue the corpora- 6. United States v. Barry, 36 Fed. 
tion for misappropriation of the stock- Rep. 246. 

holder's funds, as in Wilson v. First 7. Irons v. Manufacturers' Nat. Bank, 
Nat. Bank, i Wyoming 108; and a 36 Fed. Rep. 843. 

194 



stock and Stockholders. NA TIONAL BANKS. 



Liability. 



Married Wumen. — Nor does the fact that a person was a 
married woman at the time of the transfer of her stock in a 
savings bank to a national bank created therefrom, and also at 
the time the bank failed, exempt her from liability as a share- 
holder in the national bank.' 

Attachment of Shares. — A national bank may attach the shares 
of a stockholder therein for his debt due the bank.* 

5. Individual Liability of Stockholders — Extetit of, etc. — Under the 
National Bank act, in case of the insolvency, of a national bank 
and a deficit, each stockholder may be assessed such sum (not ex- 
ceeding an amount equal to the par value of his stock) as will 
bear the same proportion to the whole amount of the deficit as 
his stock bears to the whole amount of the capital stock of the 
bank, at its par value, and the inability of some of the stock- 
holders to contribute to the assessment will not increase the 
amount of his liability.* 

Where Shares Held as Collateral Security. — It is also imma- 
terial, in regard to the individual liability of the stockholder of a 
national bank for his proportionate share of its debts, that he 
holds the shares as collateral security for a loan.* 



1. Keyserti. Hitz, 133 U.S. 138, affirm- 
ing 2 Mackev (D. C.) 473; 3 Nat. Bank 
Cas. 340. See also, in favor of married 
woman's liability as stbckholder of a 
national bank. Witters v. Sowles, 32 
Fed. Rep. 767; s. u., 16 Am. & Eng. 
Corp. Cas. 318, followed in 36 Fed. Rep. 
640; Anderson v. Line, 14 Fed. Rep. 
405; Bundy f. Cocke, 12S U.S. 185; s.c, 
3 Nat. Bank Cas. 316. 

In an action against a married woman 
to enforce her liability as a stockholder 
of a national bank, the question of fraud 
m procuring transfers, etc., has been 
held immaterial, and so have the facts 
that the proceeds went to lier husband as 
consul general and the failure to issue 
new certificates to her on the change 
from a savings bank. Keyser v. Hitz, 
133 U. S. 138. 

2. Hagar v. Union "Nat. Bank, 63 Me. 
509; s. c, I Nat. Bank Cas. 523. 

3. United-States v. Knox, 102 U. S. 
422; s. c, 3 Nat. Bank Cas. i. 

Cessation of. — Upon a reasonable 
construction of the statute imposing 
liabilit3' upon shareholders for the debts 
of national banks, and in view of the ob- 
jects thereby intended to be accom- 
plished, it was held that the responsi- 
bility of the defendants ceased upon the 
surrender of certain stock certificates 
to the bank and the delivery to its presi- 
dent ot a power of attorney sufficient 
to effect, and intended to eft'ect, as that 
officer knew, a transfer of the stock on 



the books of the association to the pur- 
chaser, although such transfer was not 
in fact made. Whitney v. Butler, 118 
U. S. 655; s. c, 3 Nat. Bank Cas. 

177- 

Nature of. — The individual liability of 
a stockholder in a national bank is not 
such a "bad or doubtful debt" as the 
court can order to be "sold or com- 
pounded." Price XK Yates, 7 W. N. C. 
(Pa.) 51, 52; s. c, 19 Alb. L.J. 295; 
s.c, 25 Int. Rev. Rec. 113; s. c, 2 Nat. 
Bank Cas. 204. 

4. Hale f. Walker, 31 Iowa 344; s. c, 
7 Am. Rep. 137; s. c, i Nat. Bank Cas. 
471; Wheelock v. Kost, 77 111. 296; s. c, 
I Nat. Bank Cas. 406; Magruder v. 
Colston, 44 Md. 349; s. c, 22 Am. Rep. 
47; s. c, I Nat. Bank Cas. 554, 556-^7; 
Bowdell V. Farmers' etc. Nat. Bank.* 14 
Bank Mag. 3S7; s. c, 2 Nat. Bank Cas. 
146. See also Germania Nat. Bank v. 
Case, 99 U. S. 638; a. <,., 2 Nat. Bank 
Cas. 25; Moore iy. Jones, 3 Woods (U. 
S.) ^3; s. c, 2 Nat, Bank Cas. 144; 
also Pledge and Collateral Se- 
curity. 

As to brokers' implied authority to 
pledge stocks, etc., see Talmage v. Third 
Nat. Bank, 91 N. Y. 531; s. c, 3 NaJ. 
Bank Cas. 603. 

As to validity of sale by national 
bank to its directors of corporate stock 
held as collateral for loans, see Hay 
ward V. Eliot Nat. Bank, 96 U. S. 611; 
o. I,., 2 Nat. Bank Cas. i. 



195 



stock and Stockholders. NA TIONAL BANKS. Assessment. 

Preference to Creditor Illegal. — The act of congress, of 1876,^ 
provides that the individual liabihty of shareholders of an insol- 
vent national- bank, fixed by the revised statutes,* " may be 
enforced by any creditor of such association by bill in equity, in 
the nature of a creditor's bill, brought by such creditor on behalf 
of himself and all other creditors ;" and as the liability is enforce- 
able only in behalf of all creditors, any voluntary discharge or secu ■ 
rity given for the payment thereof should likewise be for the 
equal benefit of all the creditors, and any effort to give a prefer 
ence should be deemed illegal.* 

Liability of Representatives or Estates of Decedents. — So under 
the provision of the revised statutes of the United States render- 
ing shareholders individually responsible for the liabilities of a 
national bank to the value of their stock, and the further pro- 
vision that the estate of a shareholder in the hands of the execu- 
tor shall be liable in like manner and to the same extent that the 
testator would be if living,* assets which have been transferred 
to devisees or legatees cannot be subjected to liabilities of the 
bank accruing after the transfer.^ 

Enforcement Where Bank in Voluntary Liquidation. — ^A national 
bank in voluntary liquidation may still sue and be sued by its 
name for the purpose of closing its business, and a creditor may 
maintain a suit upon a disputed claim although he has filed a bill 
to enforce the individual liability of stockholders.*" 

6. Assessment Upon Stockholders — Receiver's Right of Suit for. — 
The receiver, appointed by the comptroller of the currency, for a 
national bank located in another State, is not to be treated as a 
foreign receiver, and may sue in the courts of New York for an 
assessment levied on the shareholders of the bank, independently 
of the doctrine of comity.'^ 

Voluntary Assessment. — An assessment upon national bank 
stockholders by their own vote, to restore their lost capital, so as 
to continue in business and avoid liquidation,^ will not satisfy the 
requirement of the statute,® that they shall individually discharge 
their proportion of the bank's liabilities.'*^ 
• 

1. Act June 30th, 1S76, ig Stat, at 130. But see in faVor of liability of ad 
Large, p. 63. ministrator after distribution of estate, 

2. U. S. Rev. Stat., §5151. Davis v. Weed, 44 Conn. 569; s, c, 2 

3. Gatch V. Fitch, 34 Fed. Rep. 566. Nat. Bank Cas. 115, 119, distinguished 

4. U. S. Rev. Stat., §§ 5151. 515-- in preceding case. 

See also as to construction of latter sec- 6. Central Nat. Bank z; Connecticut 

tion, Irons t'. Manufacturers' Nat. Bank, Mut. L, Ins. Co 104 U. 8,54; s. c, 3 

21 Fed. Rep. 197; s c, 6 Am. & Eng. Nat. Bank Cas 20 . 

Corp. Cas. 333; and consult Richmond 7. Peters :'. Foster, 10 N. Y. Supp. 

■J7. Irons, 121 U. S. 27, s. c, 17 Am. & 389. As to concurrent jurisdiction of 

Eng. Corp. Cas- 71, s. c, 3 Nat. Bank federal courts, see Price t^ Abbott, 17 

Cas. 211. As to word "trustees" m lat- Fed Rep 506, and cases cited. 

ter section, see Welles v. Larrabee, 36 8. Lnder U S Rev. Stat., ^ 5205. 

Fed. Rep. 866; Davis v. Essex Baptist 9, U. S. Rev. Stat,, § 5ii;i. 

Soc, 44 Conn. 5S2; s, c, 2 Nat. Bank 10. Delano t' Butler 118 U. S. 634; 

Cas. no. , s. c, 16 Am. & Eng. Corp. Cas. 343; 

5. Witters v. Sowles, 32 Fed. Rep s c, 3 N.'it. Bank Gas. 163. 

1% 



stock and Stockholders. NATIONAL BANKS. Eeoovery of AssesBments. 

7 Recovery of Assessments — Necessary Allegations. — In an action 
by the receiver of a national bank against a shareholder, to re- 
cover an assessment ordered by the comptroller, it must be 
averred in the petition, in terms or in effect, that the comptroller 
decides that necessity existed for the enforcement of the liability 
of the shareholder, and it must similarly be alleged that the 
amount of the assessment has not been paid.^ 

Right of Set-Off, etc. — The right of set-off in such an action 
may be allowed if the facts pleaded show that the claim sought 
to be set off is of such a nature that the holder thereof is entitled 
to receive the full amount thereof from the receiver before dis- 
tribution in the way of dividends can be made to the general 
creditors.^ 

8. Specifications of Capital Stock, etc., at Formation of Bank. — For 
the formation of a national bank it is necessary that a certificate 
snould be prepared and filed with the comptroller of the currency 
at Washington, which should contain, among other things, a 
specification of the amount of its capital stock, and the number 
of shares into which it was to be divided. . This is the evidence 
of the amount of its capital stock and its distribution into shares, 
and these last are then fixed, designated and known at the bureau 
of currency by the record preserved in the proper ofifice thereof.'* 

9. Increase of Capital Stock — Provision Concerning. — The National 
Bank act provides that " no increase of capital stock shall be valid 
until the whole amount of such increase is paid in, and notice 
thereof has been transmitted to the comptroller of the currency, 
and his certificate obtained, specifying the amount."* 

Reduction of Increase.— This provision is not violated where the 
proposed increase is reduced to the amount actually paid in, and 
the latter is the amount of increase specified in the notice.^ 

Comptroller s Approval of Increase. — But there can be no in- 
crease of the capital stock, so as to subject the new shares to tax- 
ation, until the prescribed approval by the comptroller of the cur- 
rency and the issuance of his certificate.'' 

Subscriptions to Increase. — Where a shareholder of a national 
bank subscribes to a certain increase of stock and pays for the 

1. Welles V. Stout, 38 Fed. Rep. 67. v. Second Nat. Bank, 57 Ind. 19S. 

2. Welles v. Stout, 38 Fed. Rep. S07. 4. U. S. Rev. Stat., § 5142. The re- 
Against set-ofF of individual claim of quisites of the section are analyzed in 
stockholder against association, see Delano v. Butler. 118 U. S. 634; s. c, 
Hobart v. Gould, 8 Fed. Rep. 57. As 16 Am. & Eng. Corp. Cas. 343; s. c, 3 
to when neither the statute of frauds Nat. Bank Cas. 163, which is quoted in 
nor the statute of limitations can be in- Winters t'. Armstrong, 37 Fed. Rep. 
terposed as a defence to the action, see 508. 

Baily v. Schroyer, 1 Atl. Rep. (Pa.) 5. Aspinwall i;. Butler, 133 U. S. 591;. 

717,718. " See also Delano w. Butler, 118 U. .S. 

3. Charleston t). Peoples' Nat. Bank, 634; s. c, 16 Am, & Eng. Corp. Cas. 
5 S. Car. 103; s. c, 22 Am. Rep. i; s. c, 343; s. c, 3 Nat. Bank Cas. 163. 

I Nat. Banli Cas. 898. The terms of 6. Charleston v. People's Nat. Bank, 
the National Bank act as to division 5 S. Car. 103; s. c, 22 Am. Reo. i;s. c, 
into shares, etc., are quoted in Weyer i Nat. Bank Cas. 898 

1S7 



stock and stockholders. NATIONAL BANKS. Eeduotion. 

same, and the b^nk afterwards reduces the amount of the in- 
crease, and he pays on his new stock an assessment declared by 
the bank, after it has become insolvent, to prevent its business 
being closed under the prescribed notice of the comptroller of the 
currency,^ such shareholder is estopped to deny his liability as a 
subscriber to the reduced amount.^ But where an increase is at- 
tempted to be made without obtaining the consent of the holders 
of two-thirds of the stock, the payment in full of the amount of 
such increase, and the certificate and approval of the comptroller 
of the currency, as required by the federal statutes, the proceed- 
ings are invalid, and preliminary subscriptions to such increase 
cannot be enforced.^ 

10. Reduction of Capital Stock — In General. — A national banking 
association may, within limits, reduce its capital stock.* 

In Order to Avoid Threatened Assessment. — And where the 
stockholders in a national banking association, the capital of 
which has become impaired by reason of past due and suspended 
claims, in order to avoid a threatened assessment by the comp- 
troller upon the stock to make good the deficiency, lawfully re- 
duce the capital stock in an amount equal thereto, a stockholder 
cannot, in case the suspended claims are subsequently realized 
upon and carried into the account as assets, compel the bank to 
distribute a share of the money so realized in proportion to the 
amount of stock surrendered by him.^ 

11. Transfer of Stock in General — Assignment Without Transfer 
on Books. — The assignment of national bank shares, without a 
transfer on the books of the bank, does not constitute a complete 
transfer in merely legal contemplation, so as to efTect an actual 
substitution of shareholders binding upon the corporation.^ But 
as between the immediate parties to the transaction, the assign- 
ment is effectual, and would be recognized and enforced, at least 
in equity, as against all parties not showing a superior right.' 

1. Provided for in U. S. Rev. Stat., follovfed in Wools v. First Nat Bank, 
§ 5205. 112 Ind. 600, and distinguishing Seeley 

2. Delano v. Butler, 118 U. S. 634; f. New York Nat. Exchange Bank, 8 
s. c, 16 Am. & Eng. Corp. Cas. 343; Daly (N. Y.) 400; s. c, i Nat. Bank 
s. c, 3 Nat. Bank Cas. 163. See also Cas. S04. 

Aspinwall v. Butler, 133 U. S. 595. 6. Nicollet Nat. Bank v. City Bank, 

Compare Eaton v. Pacific Nat. Bank, 38 Minn. 85; s. c, 8 Am. St. Rep. 643. 

144 Mass. 260; s. c, 3 Nat. Bank Cas. See also Koons v. First Nat. Bank, 8g 

483; Schierenberg v. Stephens, 32 Mo. Ind. 178; s. c, 3 Am. & Eng. Corp. Cas. 

App. 314, et seq.; s. c, 3 Nat. Bank 176, 180; Brown v. Adams, 5 Biss. (U. 

Cas. 528, e/ jfe^.; followed in Nichols K. S.) 181, where stock, by its terms, 

Stephens, 32 Mo. App. 330, or 3 Nat. transferable only on the books of the 

Bank Cas. 539. company. Dickinson v. Central Nat. 

3. Winters v. Armstrong, 37 Fed. Bank, 129 Mass. 279; s. Cii 37 Am. Rep. 
Rep. 508., 351; Moorest>. Citizens' Nat. Bank, iii 

4. McCann v. First Nat. Bank, 112 U. S. 156; s. c, 3 Nat. Bank Cas. no, 
Ind. 354; s. c, ig Am. & Eng. Corp. as to stock transferable on books only 
Cas. 365; s. c, 3 Nat. Bank Cas. 434. on surrender of certificate where false 

5. McCann v. First Nat. Bank, 112 representations by cashier. 

Ind. 354; s. c, iq Am. & Eng. Corp. 7. Nicollet Nat. Bank v. City Bank, 
Cas. 365; s. I,., 3 Nat. Bank Cas. 434; 38 Minn. 85; s. i;., 8 Am. St. Rep. 643. 

198 



stock and Stockholders. NA TIONAL BANKS. Failure to Transfer. 

Transfer Not Illegal as Made to Bank. — Nor can a sale of 
national bank shares to a broker be impeached as in violation of 
the provision forbidding the purchase by a national bank of its 
own shares, because the broker purchased the shares for the 
president of the bank, who was secretly acting in its behalf, and 
the latter filled in the blank power of attorney with the name of 
his aiding clerk, who then transferred the shares to the president, 
as trustee, on the bank's official stock register.^ 

Transfer by Foreign Executor. — In the absence of any provision 
in the by-laws or articles of association of a national bank to the 
contrary, such a bank is bound, under the laws of Pennsylvania, 
to recognize a transfer of its stock by a foreign executor duly 
appointed in another State. ^ 

Specific Performance of Contract to Sell. — Specific performance 
of a contract to sell national bank shares will not be enforced 
where it appears that the shares were desired to give control of 
the bank.* 

Pledged Stock. — A stockholder's indebtedness against a national 
bank cannot be set ofK against the claims of a pledgee of the 
stock of the former, who received it in pledge to secure the pay^ 
ment of a loan made on the faith of such pledge, without knowl- 
edge of the claims of the bank, or that it was insolvent.* 

12. Failure to Make Transfer on Books — As Preventing Change in 
Stockholder's Indiindual Liabihty.—\x\. nearly all the cases relating 
to national banks, announcing the general principles which govern 
where the issue was between the receiver representing the credit- 
ors and the person standing on the register of the bank as a 
shareholder, it is said generally" that the creditors of a national 
bank are entitled to know who, as shareholders, have pledged 
their individual liability as security for its debts, engagements 
and contracts , that' if a person permits his name to appear and 

See also Johnston v. Laflin, 103 U. S. Cin. Super. Ct. 298; s. c, noted 

Sdo; s. c, 3 Nat. Bank Cas. 13; Conti- and discredited, i Nat. Bank Cas. 

nental Nat. Bank v. Eliot Nat. Bank, 936. 
7 Fed. Rep. 369. 3. Hobbs v. Western Nat. Bank, 8 

1. Johnston v. Laflin, 103 U. S. 800, W. N. C. (Pa.) 131; s. c, 2 Nat. Bank 

803-4; s- C-, 3 Nat. Bank Cas. 13, affirm- Cas. 187. 

ing same case, 5 Dill. (U. S.) 65; or i 3. Falls Appeal, 91 Pa. St. 434; s. c, 

Nat. Bank Cas. 331.; Scott v. Pequon- 36 Am. Rep. 671 et seq.; o. c, 2 Nat. 

nock Nat. Bank, 15 Fed. Rep. 494, 499, Bank Cas. 411. 

501, discussing . like preceding case and 4. McConville v. Means, 22 W. L. 

next two cases, unrecorded transfer as Bull. 193. 

against attaching creditor. Berney Nat. As to rights of pledgee of national 

Bank v. Pinckard, 87 Ala. 577; Hazard bank shares to have a transfer on the 

V. National Exchange Bank, 26 Fed. books, etc., see Dayton Nat. Bank v. 

Rep. 94. Merchants' Nat. Bank, 37 Ohio St. 20S; 

As to right of national bank to ob- and as to compelling access to books of 

tain transfer of stock of private bank, bank to transfer stock sold on execu- 

see National Bank v. Watsontown tion, see State v. First Nat. Bank, 89 

Bank, 105 U. S. 217; and as to right of Ind. 302. 

national banks to restrain transfer of 5. According to Harlan, J., in Whit- 
stocks by one indebted to the bank, ney v. Butler. 118 U. S. 655; o. c, 3 
see Lee v. Citizens' Nat. Bank, 2 Nat. Bank Cas. 177. 

199 



stock and Stockholders. NA TIONAL BANKS. Evasive. 

remain in its outstanding certificates of stock, and on its register, 
as a shareholder, he is estopped, as between himself and the 
creditors of the bank, to deny that he is a shareholder; and that 
his individual liability continues until there is a transfer of the 
stock on the books of the bank, even where he has in good faith 
previously sold it, and delivered to the buyer the certificate of 
stock, with a power of attorney in such form as to enable the 
transfer to be made.' 

Buyer s Fraudulent or Negligent Failure. — Some of the cases 
hold ** that the seller is liable as a shareholder even where the buyer 
agreed to have the transfer made on the books of the bank, but 
fraudulently or negligently failed to do so. 

Surrender of Certificates with Power of Attorney. — But in 
none of them does it appear that the precaution was taken, after 
the sale of the stock, to surrender the certificates therefor to the 
bank itself, accompained (where such surrender was not by the 
shareholder in person) by a power of attorney, which would 
enable its ofificers to make the transfer on the register.* 

Bank's Failure to Observe Its By-laws. — Yet a party will not 
escape his individual liability as a stockholder where he takes 
and holds ."ihares,. the certificates of which were issued to him by a 
national bank in lieu of the certificates of the prior owner and 
seller, because the bank failed to observe its by-laws in regard to 
a transfer on the books. ^ 

13. Evasive or Colorable Transfers — Invalidity as to Creditors. — 
It is well settled that while one who allows himself to appear on 
the books of a national bank as an owner of its stock is liable to 
creditors as a shareholder,* whether he be an absolute owner or a 
pledgee only, yet the transaction is void as to creditors® if a regis- 

1. The cases referred to in this con- Nat. Bank Cas. 211). See also Moore 

nection, and which bear out the text in t;. Jones, 3 Woods (U. S.) 53; s. c., 2 

various particulars, comprise Davis u. Nat. Bank Cas. 144, 145. 

Essex Baptist Soc, 44 Conn. 582; s. c, Concerning the transfer of stock to 

2 Nat. Bank Cas. no; Adderly v. a director vifithout his knowledge, arid 

Storm, 6 Hill (N. y.) 624. Relating to his failure to repudiate the transaction, 

corporate stock in general. Bowden 7'. etc., see Brown z). Finn, 34 Fed. Rep. 

Farmers' etc. Nat. Bank, i Hughes {U. 124. 

S.) 307; s. c, 14 Bank Mag. 387, s. c, 2 2. Harlan, J , in Whitney v. Butler, 

Nat. Bank Cas. 146, 147, 148; Anderson iiS U. S. 655, 661; s. c, 3 Nat. Bank 

V. Philadelphia Warehouse Co., in U. Cas. 177, 182. 

S. 479; s. c, 3 Nat. Bank Cas. 122; 3. Whitney ■y. Butler, 118 U. S. 655; 

Johnson v. Laflin, 103 U. S. 800; s. c, 3 s. c, 3 Nat. Bank Cas. 177. See also 

Nat. Bank Cas. 13. Making qualifica- Hayes v. Shoemaker, 39 Fed. Rep. 319. 

tions as to other cases. TurnbuU v. But compare Richmond v. Irons. 121 

Payson, 95 U. S. 418, which also relates U.S. 27; s. c, 17 Am. & Eng. Corp. 

to corporate stock in general. Brown Cas. 71, 94; s. c, 3 Nat. Bank Cas. 211. 

V. Adams, 5 Hiss. (U. S.) 181; Davis v, 4. Laing f. Burley, loi III. 591; s. c, 

Stevens, 17 Blatchf. (U. S.) 259; ». i;., 3 Nat. Bank Cas. 369. 

2 Nat. Bank Cas. 158; and Irons v. 5. See Whitney v. Butler, 118 U. S. 

Manufacturers' Nat. Bank, 27 Fed. 655, 660; s.c, 3 Nat. Bank Cas. 177, 181. 

Rep. 591 (reversed on other points in 6. See Anderson v. Philadelphia 

Richmond v. Irons, 121 U. S. 37; s. c. Warehouse Co., in U. S. 479; s. c, 3 

17 Am. & Eng. Corp. Cas. 71; e. >.., 3 Nat. Bank Cas. 122. 

200 



Officers. NATIONAL BANKS. In General. 

tered owner, acting in bad faith, transfers his stock in a failing 
national bank to an irresponsible person for the purpose of escap- 
ing liability,^ or if his transfer is colorable only,'-* or is not an out 
and out transfer, but made with the understanding that there 
shall be a retransfer on request.* 

Stock Taken in Name of Irresponsible Party. — It is also un- 
doubtedly true that the beneficial owner of stock registered in the 
name of an irresponsible owner may, under some circumstances, 
be liable as the real shareholder; but a mere pledgee of stock in a 
national bank is not chargeable ^^^here he is not registered as 
owner, and exercises none of the rights or powers of a stock- 
holder, if he takes the security for his benefit in the name of an 
irresponsible trustee in good faith and with no fraudulent intent, 
though for the avowed purpose of avoiding individual liability as 
shareholder.* 

14. Loans by Bank on Its Stock, or Purchase Thereof. — The National 
Bank act imposes special restrictions upon national banks in re- 
gard to making loans upon the security of shares of their own 
stock or purchasing such stock ;^ and it is generally held that the 
by-laws of the bank cannot be so worded as to contravene such 
prohibition.^ 

15. Lien by Bank on Its Stock. — A national bank cannot, accord- 
ing to what seems to be the present preponderating doctrine, 
even by provisions framed with a direct view to that effect in its 
articles of association and by-laws, acquire a lien on its own stock 
held by persons who are its debtors.' 

IX. Officebs — 1, Officers in General — Compensation, Removal, etc. 
— The officers of a national bank are not, in the absence of special 

1. Bowden v. Johnson, 107 U. S.251; As to when national bank cannot be 
o. c, I Am. & Eng. Corp. Cas. 630,640; charged as owner of stock purchased 
s c, 3 Nat. Bank Cas. 55, 64; Davis v. by its president, see Prosser i>. First 
Stevens, 17 Blatchf. (U. S.) 255, 260. et Nat. Bank, 106 N. Y. 677; s. c, more 
seq.: s. c. 2 Nat. Bank Cas. 15S, 160. fully stated, 3 Nat. Bank Cas. 646. As 
See also Bowden v. Santos, i Hughes to estoppel of shareholder placing 
,U, S ) 158; s. c, I Nat. Bank Cas. 271. parts of his shares in the hands of a 

2. Germania Nat. Bank i\ Case, 99 third party to hold for him, under a 
U. S. 628; s. c, 2 Nat. Bank Cas. 25. secret declaration of trust, see Young 
See Davis v. Stevens, 17 Blatchf. (tl. v. Yough, 23 N.J. Eq. y.z,. 

S ) 259, Witters v. Sowles, 25 Fed. Rep. S. Nat. Bank act, § 36; U. S. Rev. 

168, 169; s. c, 32 Fed. Rep. 130, 136; Stat., § 5201. 

Case V. Small, 4 Woods (U. S.) 78, So, 6. See Fechheimer v. National Ex- 

81. change Bank, 79 Va. So; s. c, 5 Am. & 

3. Germania Nat. Bank -v. Case, 99 Eng. Corp. Cas. 156; Nicollet Nat. 
U S. 628; s. i;., 2 Nat. Bank Cas. 25. Bank i'. City Bank, "38 Minn. 85; s. i,., 8 
See also as to sale of stock in a national Am. St. Rep. 643. 

bank while it is a going concern, I^2sas- As to fictitious sale of stock pur- 
sier !<. Kenned3', 36 La. An. 539, 542; chased in violation of such re.strictions, 
s c. on other points, 123 U. S. 521; or see Bundy v. Jackson, 24 Fed. Rep. 628. 
3 Nat. Bank Cas. 2S8. ' 7. Bullard v. National Eagle Bank, 

4. Anderson v. Philadelphia Ware- 18 Wall. (U. S.) 589; s. c, 2 Nat. Bank 
house Co., Ill U. S, 479; n. c, 3 Nat. Cas. 93; Nicollet Nat. Bank v. City 
Bank Cas. 122. See also Welles v. Bank, 38 Minn. 85; s. c, 8 Am. St. Rep. 
Larrabee, 36 Fed. Rep. 866. 643. But see contra, Lockwood v. 

201 



Officers. 



NA TIONAL BANKS. 



In General. 



agreement, entitled to compensation for their ordinary services •} 
and are subject to removal if they fail to perform the duties re- 
quired of them.* 

Liabilities Imposed or hicurred by. — A national bank is liable 
for its officers' misrepresentations made to depositors concerning 
the character or scope of written instruments,* but the officers of 
an insolvent national bank cannot be held personally responrfble 
on loans and discounts merely because they turn out to be injudi- 
cious.* 

Criminal Liabilities. — The'National Bank act, whose interpre- 
tation in this respect has been the subject of much judicial con- 
sideration, makes special provision for such criminal offences by 
officers of national banks as false entries^ and embezzlement, 
either alone® or in conjunction with kindred offences,'' such as 
misapplication of funds.* But there is a conflict in the authori- 



Mechanics' Nat. Bank, 9 R. I. 308; 
s. c, II Am. Rep. 253; hi re Bigelow, 

2 Ben. (U. S.) 469. Consult further 
supra, PrescribingBy-Laws. 

1. See Citizens' Nat. Bank v. Elliott, 
55 Iowa 104. Compare First Nat. 
Bank v. Drake, 29 Kan. 311; s. c, i 
Am. & Eng. Corp. Cas. 210. 

2. Harrington v. First Nat. Bank, i 
Thomp. & C. (N. Y.) 361; s. c, i Nat. 
Bank Cas. 760, sustaining such removal 
though salary for balance of unex- 
pired term unpaid. See also Taylor v. 
Hutton, 43 Barb. (N. Y.) 195; s. c, i 
Nat. Bank Cas. 755, sustaining removal 
before by-laws legally adopted. 

Troceedlngs by. — As to requisites of 
verification of complaint by national 
bank officers, see Commercial Nat. 
Bank v. Hutchison, 87 N. Car. 22; 
s. u., 5 Am. & Eng. Corp. Cas. 288; and 
to objections to depositions by national 
bank officers, see First Nat. Bank v. 
First Nat. Bank, 114 Pa. St. i, 7. 

3. Steckel v. First Nat. Bank, 93 Pa. 
St. 376; s. c, 39 Am. Rep. 758-60; s. c, 

3 Nat. Bank Cas. 719; Ziegler v. First 
Nat. Bank, 93 Pa. St. 393; s. c, 3 Nat. 
Bank Cas. 721; s. c, 39 Am. Rep. 758. 
See also Resh v. First Nat. Bank, 93 
Pa. St. 397; s. c, 3 Nat. Bank Cas. 724; 
West V. First Nat. Bank, 20 Hun (N. 
Y) 408. But compare First Nat. Bank 
V. Williams, 100 Pa. St. 123. 

4. Witters v. Sowles, 31 Fed Rep. 12; 
s. c, 24 Blatchf. (U. S.) 332. See also 
Movius -T'. I^ee, 30 Fed. Rep. 298, 303; 
s. c, 24 Blatchf. (U. S.) 291; United 
States V. Harper, 33 Fed. Rep. 471; 
Clews V. Bardon, 36 Fed. Rep. 617. 
Compare United States v. Fish, 24 
Fed. Rep. 585. 5S8; s. c, 10 Am. & 



Eng. Corp. Cas. 283. Consult also 
in favor of right of officer of national 
bank to borrow money therefrom, 
Blair v. First National Bank of Mans- 
field, 10 Ohio Leg. News 84; s. i;., 2 
Nat. Bank Cas. 173,175. 

6. See United States v. Britton, 107 
U. S. 655; s. c, 3 Nat. Bank Cas. 76, 
83; United States v. Crecilius, 34 Fed. 
Rep. 30; In re Van Campen, 2 Ben. 
(U. S.) 419; s. c, I Nat. Bank Cas. 185, 
188; United States v. Patterson, 29 Fed. 
Rep. 775. Concerning a false declara- 
tion or statement in a report concern- 
ing the affairs of the bank, see United 
States V. Curtis, 107 U. S. 671; s. c, 3 
Nat. Bank Cas. 91. Compare United 
States V. Barton, 20 Blatchf. (U. S.) 
351. See also United States v. Allen, 
10 Biss. (U. S.) 90. 

6. See United States v. Conant, 9 
Cent. L.J. 129; s. c, 2 Nat. Bank Cas. 
148. As to embezzlement by corporate 
officers in general, see 6 Am. & Eng. 
Encyc. of Law 477. 

7. See United States v. Northway, 
120 U. S. 327; s. c, 3 Nat. Bank Cas. 
199; United States v. Harper, 33 Fed. 
Rep. 471; United States v. Taintor, 11 
Blatchf. (U. S.) 374; s. c, i Nat. Bank 
Cas. 256; United States v. Lee, 12 Fed. 
Rep. 816; United States v. Voorhees, 9 
Fed. Rep. 143; In re Van Campen, 2 
Ben. (U. S.) 419; s. c, ' Nat. Bank 
Cas. 

8. See, concerning this offence, 
United States v. Britton, 107 U.S. 655; 
s. c, 3 Nat. Bank Cas. 76; United 
States V. Britton, 108 U. S. 193; s. t., 3 
Nat. Bank Cas. 99; United States v. 
Fish, 24 Fed. Rep. 585; s. c, 10 Am. & 
Eng. Corp. Cas. 283. 



202 



Officers. 



NA TIONAL BANKS. 



President. 



ties, largely affected by changes in the National Bank act and the 
nature of the particular offence charged, as to whether the State 
as well as the federal courts have jurisdiction in such cases. ^ 

2. President. — The president of a national or other bank must, 
like other agents, act within the scope of his authority, in order 
to bind his principal in the absence of ratification ;^ but the presi- 
dent may perform such known and approved managerial functions 
as to justify him, without special authority in the by-laws, in pur- 
chasing real estate in satisfaction of suspended paper or a doubt- 
ful debt due a national bank -^ and such bank may be bound by 
his acts, within the apparent scope of his authority, although per- 
formed away from the place where the bank is situated.* 

3. Cashier — Authority. — The extent of the authority of a cash- 
ier of a national bank may not, under certain circumstances, be 
questioned by the bank.* The decisions upon the question of the 
authority of such a cashier or other officer to receive special 
deposits, have already been cited in discussing the powers of 
national banks, and their liability for the loss of such deposits." 

Functions, etc. — The functions of a cashier of a national bank, 
his rights and duties, and the liabilities incurred by or imposed 
upon him under various circumstances, are considered in the cases 
cited in the note below.' 



1. See, in favor of State jurisdiction, 
Hoke-f. People, \22 111. 511; s. c, 3 
Nat Bank Cas. 372; State f. Cross, loi 
N. Car. 770; Com. v. Luberg, 94 Pa. 
St. 85; s. c, probabh-, 2 Nat. Bank Cas. 
408; State V. Tuller, 34 Conn. 280; s. i;., 
I Nat. Bank Cas. 375; Com. v. Tenny, 
97 Mass. 50; s. c, I Nat. Bank Cas. 
568. Contra, see People v. Fonda, 62 
Mich. 401; s. c, 3 Nat. Bank Cas. 501; 
United States v. Buskey, 38 Fed. Rep. 
99, discussing Com. v. Felton, loi 
Mass. 204; s. c, 1 Nat. Bank Cas. 573, 
and Cora. v. Barry, 116 Mass. i; s. c, i 
Nat. Bank Cas. 605. Compare as to 
passing counterfeit bank notes, Ex 
farte Houghton, 8 Fed. Rep. 897. 

2. Kennedy v. Otoe Co. Nat. Bank, 7 
Neb. 59. 

3. Libby v. Union Nat. Bank, 99 111. 
622, s. c, 3 Nat. Bank Cas. 358. Con- 
cerning unauthorized sale of national 

bank's property by president, see 
First Nat. Bank v. Lucas, 21 Neb. 
2S0, 285. As to effect of long ac- 
quiescence hy bank in acts of its 
president binding it to his release of 
a judgment lien, see Winton v. Little, 
94 Pa. St. 64; s. c, 3 Nat. Bank Cas. 
725. As to bank's right to profit on 
resale to himself by president of prop- 
erty purchased for it by him, see Na- 
tional Bank v. Seward, 106 Ind. 264. 



203 



In favor of right of president to bor- 
row from bank, see Blair v. First Nat. 
Bank, 10 Chic. Legal News 84; s. c, 2 
Nat. Bank Cas. 173. 

4. Burton t'. Burley, 9 Biss. (U. S.) 
253; s. c, 2 Nat. Bank Cas. 134. For 
circumstances under which a loan was 
held to be a loan to a national bank, 
and not to its president, individually, 
see Eastern Townships Bank v. Ver- 
mont Nat. Bank, 22 Fed. Rep. 186. As 
to when national bank, reorganized out 
of State bank, may maintain an action 
against the president for money had 
and received, see Atlantic Nat. Bank v. 
Harris, 118 Mass. 147; a. c, 2 Nat. 
Bank Cas. 454. As to application to 
president of a national bank of Texas, 
statute requiring sworn statement as 
to shares, see Downs v. State, 22 Tex. 

APP- 393- 

Vice President. — As to liability of na- 
tional bank on guaranty by its vice pres- 
ident, see Peoples' Bank v. Manufact- 
urer's Nat. Bank, 101 U. S. 181, s. c, 2 
Nat. Bank Cas. 97. 

5. See Cocheco Nat. Bank v. Has- 
kell, 51 N. H. 116; s.c 12 Am. Rep. 67; 
Cooper V. First Nat. Bank, 40 Kan. 5. 

6. See paragraph on General and 
Incidentai. Powers. 

7. See Parkhurst v. Citizens' Nat. 
Bank, 6i Md. 254; s. c, 3 Nat. Bank 



Officers. 



NA TIONAL BANKS. 



leller. 



Bond. — Sureties on the official bond of a national bank cashier 
are not liable where they were induced to become such sureties 
through a statement published by the directors, according to law, 
which showed the affairs of the bank to be well managed.^ 

4. Teller. — In regard to the teller of a national bank, the deci- 
sions have dealt with his bond,** his criminal liability,* and the 
liability of the bank for the teller's acts.* 

5. Directors — Action as Board. — To bind a national bank, the 
directors must act together as a board ; and their separate indi- 
vidual assent is insufficient.^ 

Eligibility. — A transferee of sto.ck in a national bank, whi-ch 
decides not to extend its corporate existence, is not eligible as a 
director during the period while the bank is winding up its ex- 
istence.^ 

Authority. — The powers of the directors of a national bank are 
not regulated by the strict principles of a special trust ; for though 
they act in a fiduciary capacity, yet they are clothed by the 
federal Statute with a power to manage the affairs of the bank, 
and this implies a considerable element of discretion.' 



Cas. 463; s. c, 3 Am. & En'g. Corp. 
Cas. 346; Second Nat. Bank ;'. Burt, 
93 N. Y. 233; s. c, 3 Nat. Bank Cas. 
C09; Norton ^k Derry Nat. Bank, 61 N. 
H. 589; s. c, 60 Am. Rep. 334; s. c, 3 
Nat. Bank Cas. 56S; Holmes v. Boyd, 
90 [nd. 332; s. c, 3 Nat. Bank Cas. 414; 
Allen V. First Nat. Bank, 127 Pa. St. 
51; Clews V. Bardon, 36 Fed. Rep. £17; 
Wilson z>. Second Nat. Bank (Pa.), 7 
Atl. Rep. 145; Crystal Plate Glass Co. 
V. Livingston Bank, 6 Mont, 303; 
Cooke V. State Nat. Bank, 52 N. Y.96; 
s. c, II Am. Rep. 667; s. c, i Nat. 
Bank Cas. 69S; Fisher v. 'National 
Bank, 48 N. J. L. 390; Fishkill Sav. 
Inst. V. National Bank, 80 N. Y. 162; 
s. c, 36 Am. Rep. 595; First Nat. Bank 
V. Dunbar, iiS 111.625; First Nat. Bank 
V. Brooks, 22 111. App. 238; s. c, 3 Nat. 
Bank Cas. 387; Houghton v. First Nat. 
Bank, 26 Wis. 663; s. c, 7 Am. Rep. 
107; Allen's Appeal, 119 Pa. St. 192, 
following Com. t'. Ketner, 92 Pa. St. 
372, or 2 Nat. Bank Cas. 404; United 
States V. Taintor, 11 Blatchf. (U. S.) 
374: s. c, I Nat. Bank Cas. 256; Pepper 
V. Planters' Nat. Bank (Ky.), i Am. & 
Eng. Corp. Cas. 252; First Nat. Bank 
V. Drake, 29 Kan. 311; s. c, i Am. & 
Eng. Corp. Cas. 210; Second Nat. 
Bank v. Burt, 93 N. Y. '233; s. c, 3 Am. 
& Eng. Corp. Cas. 315. 

1. Graves v. Lebanon Nat. Bank, 10 
Bush (Ky.) 23; s. c, 19 Am. Rep. 50; 
s.c, I Nat. Bank Cas. 493. But against 
discharge of surety because cashier was 



a defaulter at time of giving of bond, and 
bank neglected to ascertain that fact, 
see Bowne v. Mount Holly Nat. Bank, 
45 N.J. L. 360; s. c, 3 Am. & Eng. 
Corp. Cas. 339; Tapley v. Martin, 116 
Mass. 275; s. c, I Nat. Bank Cas. 6ir. 
See also, as to teller or officers in gen- 
eral, Wayne v. Commercial Nat. Bank, 
52 Pa. St. 343. 

2. See New Orleans Nat. Bank v. 
Wells, 28 La. An. 736; s. c, 26 Am. 
Rep. 107; Wayne v. Commercial Nat. 
Bank, 52 Pa. St. 343. 

3. See State u.'Tuller, 34 Conn. 280; 
s. c, I Nat. Bank Cas. 375. 

4. See Steckel v. Firs-t Nat. Bank, 93 
Pa. St. 376; s. c, 3 Nat. Bank Cas. 319; 
Weckler v. First Nat. Bank, 42 Md. 
581; s c, 20 Am. Rep. 95; s. c, I Nat. 
Bank Cas. 533. 

5. First Nat. Bank v. Drake, 35 Kan. 
564; s. c, 57 Am. Rep. 193; s. c, 3 
Nat. Bank Cas. 445. 

6. Richards v. Attleborough Nat. 
Bank, 148 Mass. 187; s. c, 3 Nat. Bank 
Cas. 495. As to ■ ad interim directors, 
pending conversion of State into Na-* 
tional bank, see Lockwood v. Me- 
chanics' Nat. Bank,g R. I. 308; s.c, 11 
Am. Rep. 253; s. c, 1 Nat. Bank Cas. 

89.S- 

7. Keyser v. Hitz, 2 Mackey (D. C.) 
513; s.c, I Am. & Eng. Corp. Cas. 231. 
As to power to submit claim to arbi- 
tration, see Richards v. Attleborough 
Nat. Bank, 148 Mass. 187; s. c, 3 Nat. 
Bank Cas. 497. 



204 



Circiilatiou. 



NATIONAL BANKS 



Circulation, 



Cotnpensation. — Where the directors of a national bank appoint 
one of their number to act as a ministerial officer of the corpo- 
I'ation, he is prima facie entitled to reasonable compensation for 
his services as such officer; but an express contract to perform 
the services without any direct compensation in money controls.^ 

Liabilities, etc. — The directors of a national bank or other cor- 
poration are bound only to use reasonable diligence, such as men 
usually exercise in the management of their own affairs of a simi- 
lar nature ; but they are personally liable if they suffer the cor- 
porate funds or property to be wasted by gross negligence and 
inattention to the duties of their trust.** 

X. CmciriATION — Bonds Deposited as Security for. — The ordi- 
nary priority of the United States government over other credit- 
ors does not apply to bonds or funds designed for the redemption 
of the circulation of national banks.^ 

National Bank Currency. — The notes or bills issued by the 
national banks are included in the phrase, " United States cur- 
rency."* 

Certificates of Deposit. — But certificates of deposit in the ordi- 
nary form, issued by a national bank to depositors, are not "post- 
notes" designed or adapted to circulate as money, so as to come 
within the prohibition of the National Bank act." 



1. First Nat. Bank v. Drake, 29 Kan. 
311; s. c, I Am.& Eng. Corp. Cas. 2IO. 
On validity of agreement by national 
bank president to give stock to a per- 
son becoming a director, see Rich v. 
State Nat. Bank, 7 Neb. 201 ; s. c. 29 Am. 
Rep. 382; s. c, 2 Nat. Bank Cas. 28^. 

2. Ackcrman v. Halsey, 37 N. J. Eq. 
356; s. c, I Nat. Bank Cas. 239. See 
also Brinckerhoff v. Bostwick, 88 N. 
Y. 52; s. I, , 3 Nat. Bank Cas. 591; s. c, 
on other points, 10^ N. Y. 567; Hand v. 
Atlantic Nat. Bank, 55 How. Pr. (N. 
Y.) 231; Conway v. Halsey, 44 N. J. L. 
462. Consult further concerning lia- 
bilities of national bank directors. 
Clews V. Bardon, 36 Fed. Rep. 617; 
Movius V. Lee, 24 Blatchf. (U. S.) 291; 
Witters v. Sowies, 24 Blatchf. (U. S.) 
332 )• United States v. Neale, 14 Fed. 
Rep. 767. 

Conduct In General. — See Mayor etc. 
of New York v. Tenth Nat. Bank, iii 
N. Y. 446; s. c, 3 'Nat. Bank Cas. 651;; 
Hayward v. Eliot Nat. Bank, 96 U. S. 
611; s. c, 2 Nat. Bank Cas. 1. 

Knowledge. — First Nat. Bank v. 
Christopher, 40 N. L. 435; s. c, 29 Am. 
Rep. 262. See also Third Nat. Bank v. 
Harrison, 3 McCrary (U. S.) 316; 
Brown v. Firm, 34 Fed. Rep. 124; First 
Nat. Bank v. Drake, 29 Kan. 311; o. c, 
1 Am. & Eng. Corp. Cas. 210. 



205 



3. See Cook Co. Nat. Bank v. 
United States, 107 U. S. 445; s. c, 3 
Nat. Bank Cas. 6S; s. c, i Am. & Eng. 
Corp. Cas. 533; Jackson v. United 
States, 20 Ct. of CI. 298. See also, as 
to conflicting claims to surplus of pro- 
ceeds of such bonds, Van Antwerp v. 
Hulburd, 8 Blatchf. (U. S.) 282, 283; 
s. c, I Nat. Bank Cas. 219. As to 
priority of government over attaching 
creditor, see Schmidt v. First Nat. 
Bank, 22 La. An. 314; o. c, 1 Nat. Bank 
Cas. 505. 

4. State V. Casting, 23 La. An. 609; 
s. c, I Nat. Bank Cas. 508. See also, 
as to nature of such notes or bills, 
Home V. Greene, 52 Miss. 452; s. c, i 
Nat. Bank Cas. 643 {opinion of Pey- 
ton, J., before reargument). As to 
right of congress to restrain the circu- 
lation of any notes not issued under its 
authority, Veazie Bank v. Fenno, 8 
Wall. (U. S.) 533; s. c, I Nat. Bank 
Cas. 22. And as to validity of circu- 
lating notes of national banks, without 
the treasury seal, United States v. 
Bennett, 17 Blatchf. (U. S.) 357. The 
taxation of such currency has already 
been treated under Exemption from 
Taxation in General. 

5. Riddle v. First Nat. Bank, 27 Fed. 
Rep. 503. See also Hunt's Appeal, 141 
Mass. 515; s. u., 3 Nat. Bank Cas. 474. 



Deposits, 



NATIONAL BANKS. 



Depouta. 



XI. Deposits — National Bank as Depository of Public Moneys. — 
Designating a national bank as a depository of public moneys 
does not constitute it an agent of the government, or render the 
government liable for moneys lost by a failure o1 such bank.^ 

Demand and Interest. — Where, however, a national bank which 
holds deposits, refuses to pay the same on demand, and thereafter 
a receiver is appointed, the depositor is entitled to interest on his 
deposits from the date of the demand.^ 

Set-off by Depositor. — But there is a conflict in the authorities 
upon the question whether a depositor in a national bank which 
has failed and passed into the hands of a receiver, may set off the 
amount of his deposit against his debt to the bank.* 

.Application of Deposits. — A national bank which has received 
money from a depositor and credited him with it on its books, and 
thereby engaged to honor his checks, is estopped from alleging 
that the money belonged to another,* and cannot apply it to 
another's account.^ ' 

Loss of Special Deposits. — So a national bank which has been 
accustomed to receive United States bonds or other valuables as 
special deposits gratuitously, is, according to the doctrine now 
prevalent, liable for any loss thereof occurring through the want of 
that degree of care which good business men would expect in 
keeping property of such value.^ 



1. Branch v. United States, I2 Ct. of 
CI. 281; s. c, I Nat. Bank Cas. 363. 
See also, as to deposit of trust funds 
with national banks, State Nat. Bank 
V. Reilly, 124 111. 464; Central Nat. 
Bank v. Connecticut Mut. L. Ins. Co., 
104 U. S. 54; Third Nat. Bank v. Still- 
water Gas Co., 36 Minn. 75. 

2. National Bank v. Mechanics' Nat. 
Bank, 94 U. S. 437; s. c, i Nat. Bank 
Cas. 133. But see, as to when demand 
not a pre-requisite to recovery, Chemi- 
cal Nat. Bank v. Bailey, 12 Blatchf. (U. 
S.) 480; s. c, I Nat. Bank Cas. 260. 
And further concerning demand, 
Humphrey v. Count3' Nat. Bank, 113 
Pa. St. 417; Viets tt. Union Nat. Bank, 
loi N. Y. 563; s. c, 54 Am. Rep. 743. 

3. See, in favor of such set-off, Piatt 
V. Bentley, 11 Am. L. Reg., N. S. 171; 
s. c, I Nat. Bank Cas. 758, and also as 
to savings bank. New Amsterdam 
Sav. Bank v. Tartter, 54 How. Pr. (N. 
Y.) 385. Against such set-off, see 
Venango Nat. Bank v. Taylor, 56 Pa. 
St. 14; s. c, I Nat. Bank Cas. S42, and 
compare also, as to savings bank, Os- 
born V. Byrne, 43 Conn. 155; s. c, 21 
Am. Rep. 641 . Concerning want of right 
of set-off upon dishonor of check given 
in payment to national bank by a holder 
of a note, see Union Nat. Bank v. Can- 



onsburg Iron Co., 6 Atl. Rep. (Pa.) 577. 

4. First Nat. Bank v. Mason, 95 Pa. 
St. 113. 

6. Citizens' Nat. Bank v. Alexander, 
120 Pa. St. 476. See further, concern- 
ing application of deposits in various 
cases, Flournoy v. First Nat. Bank, 78 
Ga. 222; Continental Nat. Bank ■v. 
Weems, 69 Tex. 489; s. c, 5 Am. St. 
Rep. 85; Drovers' Nat. Bank v. 
O'Hare, 119 111. 646; Neff v. Green Co. 
Nat. Bank, 8g Mo. 581; National Bank 
V. Indiana Banking Co., 114 111. 483. 
Concerning note payable at bank, see 
Grissom v. Commercial Nat. Bank, 87 
Term. 350, 354; s. c, 10 Am. St. Rep. 
669. As to paying out deposits on 
checks, see Lynch r'. First Nat. Bank, 
107 N. Y. 179; s. c, I Am. St. Rep. 
S03. Also vEtna Nat. Bank v. Fourth 
Nat. Bank, 46 N. Y. 82; s. ^., 7 Am. 
Rep. 314; Merchants' Nat. Bank v. 
Nat. Bank, 139 Mass. 513. And as to 
paying forged check, see Wfeinstein v. 
Jefferson Bank, 69 Tex. 38; s. c, 5 Am. 
St. Rep. 23. But compare First Nat. 
Bank v. State Bank, 22 Neb. 769; s. c, 
3 Am. St. Rep. 294; Commercial etc. 
Bank w. First Nat. Bank, 30 Md. 11; 
s. c, 96 Am. Dec. 554; Atlanta Nat. 
Bank v, Burke, 81 Ga. 597. 

6. Bank v. Zent, 39 Ohio St. 105; 



206 



' ColltctioiiB. 



NATIONAL BANKS. 



Faymenta. 



Certifying Checks, etc. — The provision of the National Bank 
act declaring it to be unlawful for national banks to certify any 
check unless the drawer has the amount thereof on deposit, does 
not affect the validity of a check certified in violation thereof.^ 

Xn. Collections — Liability of National Bank Concerning. — 
Collecting commercial paper is a part of the regular business of 
banking, when carried on under national or under other bank 
charters;* and a national bank will be liable for negligence or mis- 
conduct therein, the same as any other bank, or agent. ^ 

Receipt for Collection Only or Otherwise. — In the case of national 
as of other banks, there is a difference in liability, etc., according 
as negotiable paper is received for collection only, or for collection 
and credit, etc.* 

In Cash Only. — A national or other bank, to which a check is 
entrusted for collection, has no right to accept anything in lieu of 
money, and if it accepts a cashier's check, or other obligation, in 
place of cash, its liability to the depositor becomes fixed." 

XIII. Payments — In General. — In the case of national as well 
as other banks, various questions have arisen out of payment of 
checks by national banks, £ind cognate matters.® 



s. t., 3 Nat. Bank Cas. 698. The au- 
thorities on this subject have been cited 
under General and Incidental 
Powers. See also White v. Com- 
monwealth Nat. Bank, 4 Brewst. (Pa.) 
234; First Nat. Bank v. Citizens' Bank, 
21 Int. Rev. Rec.382. Consult further, 
for liability in various cases, Anderkerk 
V. Central Nat. Bank, 52 Hun (N. Y.) 
i; Saly v. Hibernia Nat. Bank, 39 La. 
An. 90; Cutler v. American Exchange 
Nat. Bank, 113 N. Y. 593; Fisk v. Ger- 
mania Nat. Bank, 40 La. An. 820; 
Hughes V. First Nat. Bank, no Pa. St. 
428 

1. Thompson v. St. Nicholas Nat. 
Bank, 113 N. Y. 325; s. c, 3 Nat. Bank 
Cas. 663. 

Certificates of Deposit. — As to right to 
issue, see under Circulation. As to 
effect and transfer of certififcate of de- 
posit on national bank, see First Nat. 
Bank v. Clark, 42 Hun (N. Y.) 16. 

2. Mound City Paipt & Color Co. v. 
Commercial Nat. Bank, 4 Utah 3i;3. 

3. Mound City Paint & Color Co. v. 
Commercial Nat. Bank, 4 Utah 353. 
See, for implied recognition of such 
liability, Exchange Nat. Bank v. Third 
Nat. 112 U. S. 276; Merchants' Nat. 
Bank V. Goodman, 109 Pa. St. 422; 
s. I,., 58 Am. Rep. 728. As to liability 
in various cases, see Power v. First 
Nat. Bank, 6 Mont. 251; Harvej' v. 
Girard Nat. Bank, 119 Pa. St. 212; 
Drovers' Nat. Bank v. Anglo-Ameri- 



can Packing etc. Co., 117 III. 100; s. c, 
i;7 Am. Rep. S55; First Nat. Bank v. 
First Nat. Bank, 114 Pa. St. i. 

4. Concerning rights of bank where 
receipt for collection only, see Freeman 
V. Citizens' Nat. Bank, 78 Iowa 150. 
But comfare Averell v. Second Nat. 
Bank, 6 Mackev (D. C.) 358; Stark v. 
United States Nat. Bank, 41 Hun (N. 
Y.) 506. As to holding national bank 
as garnishee, see First Nat. Bank v. 
Leppel, 9 Colo. 594. And as to pro- 
ceeds of collection, see City Nat. Bank 
V. Martin, 70 Tex. 643; Manufacturers' 
Nat. Bank v. Continental Bank, 148 
Mass. 553. But comfare with latter 
case. First Nat. Bank v. Armstrong, 39 
Fed. Rep. 231. 

Concerning "collection and return," 
see' Continental Bank v. Weems, 69 
Tex. 489; s. c, 5 Am. St. Rep. 85. And 
consult Philadelphia Nat. Bank v. 
Dowd, 38 Fed. Rep. 172. Compare as 
to special endorsement for collection. 
First Nat. Bank v. Armstrong, 36 Fed. 
Rep. 59; Commercial Nat. Bank v. 
Armstrong, 39 Fed. Rep. 684; Fifth 
Nat. Bank v. Armstrong, 40 Fed. Rep. 
46. As to "collection and credit," see 
First Nat. Bank v. Bank of Monroe, 33 
Fed. Rep. 408; German Nat. Bank v. 
Burns, 12 Colo. 539. 

6. Fifth Nat. Bank v. Ashworth, 123 
Pa. St. 212. 

6. See generally, as to payment of 
checks, Brennan'zi. Merchants' Nat. 



207 



Loans and Discounts. 



NATIONAL BANKS. 



Winding ITp. 



Paying One of a Set of Checks. — Payment oy a national bank 
of one of a set of checks, as well as drafts, is a discharge of the 
whole set.* 

XIV. Loans and Discounts. — Most matters concerning this topic 
have been already considered. Some miscellaneous decisions are 
cited in the note below.* 

XV. Winding Up and Liquidation — 1, Winding JSi^—How Far 
Provisions of National Bank Act Exclusive.^]^3it\ov\a\ banks, if 
insolvent, can be wound up only in the mode provided by the 
National Bank act, and were not subject to the late National 
Bankrupt act ;* but in cases not within the special provisions of 
the National Bank act, a national bank may be proceeded against 
in the same manner as any other debtor or corporation, and a re- 
ceiver appointed when such a course is proper.* 

Effect of Appointment of Receiver. — The appointment of a re- 
ceiver under the National Bank- act does not, however, work an 
absolute dissolution of the corporation, or prevent it from being 
subjected to suits,^ or cause its property, outside of its shares, to 



Bank, 62 Mich. 343; Citizens' Nat. 
Bank v. Importers' etc. Nat. Bank, 44 
Hun (N. Y.) 3S6; Canonsburg Iron 
Co. x". Union Nat. Bank (Pa.), 6 Atl. 
Rep. 574; Armstrong v. Second Nat. 
Bank, 38 Fed. Rep. 883. As to pay- 
ment of raised draft by national bank 
through mistake, see Nat. Park Bank 
V. Seaboard Bank, 114 N. Y. 28. As 
to settlements through clearing houses 
in which national banks are concerned, 
see National City Bank v. New York 
Exchange Bank, loi N. Y. 595. As to 
effect of taking certified check, see 
Borne v. First Nat. Bank (Ind. 1890), 
24 N. E Rep. 173. 

1. Merchants' Nat. Bank v. Ritzinger, 

iiS 111.484. 

2. Concerning the scope of a guar- 
anty of the "full and ultimate payment 
of all loans," see National Exchange 
Bank v. Gay, 57 Conn. 224. As to 
transaction which may be discount of 
paper or deposit of money, see First Nat. 
Bank v. Bank of Monroe, 33 Fed. Rep. 
40S. As to admissibility of proof of 
local custom of bankers to show that 
borrowing money was within the 
scope of the customary business of a 
national bank, see Crain v. First Nat. 
Bank, 114 111. 516, 523. As to when 
bank holds money as pledge for dis- 
counts of customer, see Humphrey v. 
County Nat. Bank, 113 Pa. St. 417. 

As "to loan or discount of negotiable 
paper, see subdivision of Powers 
CoxcERNiXG Negotiable Instru- 
ments, Stocks, etc. 



Concerning the authorit3' of national 
banks to loan money on mortgages of 
real property, see subdivision on Pow- 
ers Concerning Real Estate. 

Concerning loans exceeding one- 
tenth of capital stock, see subdivision 
on Loans Which Are Ultra 
Vires. 

As to general power of a natiorial 
bank to take stocks or bonds as secu- 
rity, see subdivision on Powers Con- 
cerning Personal Property. And 
see same subdivision for power of a 
national bank to take pledges or mort- 
gages of chattels. 

3. In re Manufacturers' Nat. Bank, 5 
Biss. (U. S.) 499; s. c, I Nat. Bank 
Cas. 192. So the dissolution of a na- 
tional bank can»be declared only in the 
mode prescribea by the National Bank 
act. Union Gold Mining Co. v. Rocky 
Mountain Nat. Bank, i Colo. 531; s. c, 
on other points, 90 U. S. 640, or i Nat. 
Bank Cas. 151. 

4. Irons v. Manufacturers' Nat. Bank, 
6 Biss. (U. S.) 301; s. c, 3 Mj'er's Fed. 
Dec. 201; s. c, I Nat. Bank Cas. i03. 

5. Bank of Bethel -v. Pahquioque 
Bank, 14 Wall. (U. S.) 383; s. c, i Nat. 
Bank Cas. 77; affirming 36 Conn. 325, 
or 4 Am. Rep. 80; Green v. Walkill 
Nat. Bank, 7 Hun (N. Y.) 63; s. c, I 
Nat. Bank Cas-. 7S6. See also Security 
Bank v. National Bank, 4 Thomp. & 
C, (N. Y.) 518; s. c, I Nat. Bank Cas. 
774; Chemical Nat. Bank v. Baile^', 12 
Blatchf (U. S.) 480; o. c, I Nat. Bank 
Cas. 260. 



208 



Winding Up. NATIONAL BANKS. Beeeiver. 

cease to be exempt from taxation.^ 

Interest on Claims Pending Administration. — Under that act, 
where a national bank is declare'd in default by the comptroller of 
the currency, he is authorized to appoint a receiver of its affairs, 
and to place such receiver in possession of its assets ; and if a suf- 
ficient fund is realized from the assets to pay all claims against 
the bank, and to leave a surplus, the comptroller ought to allow in- 
terest on the claims, during the period of administration, before 
appropriating the surplus to the shareholders of the bank,* 

Voluntary Liquidation. — Not only does such involuntary liqui- 
dation of a national bank fail to dissolve the corporation or ren- 
der it free from liability to suit, but the same is true of the volun- 
tary liquidation authorized by the National Bank act.* 

Forfeiture of Rights and Privileges. — So a forfeiture of the 
rights and privileges of a national banking association, for viola- 
tion of the provisions of the National Bank act, can be deter- 
mined only in a suit instituted by the comptroller of the currency 
in his own name; and the association must stand until dissolved 
in that way.* 

Dissolution by Federal Court. — Nor does dissolution of a 
national bank by a federal court affect rights of a creditor whose 
action against the bank was pending at the time in a State, 
court. ^ 

2. Receiver — Relation to Government. — A receiver appointed to> 
wind up a national bank is an officer of the United States, so as 
to bring an action brought by him within the jurisdiction of a 
federal court ;^ but he does not represent the government so that 

Rosenblatt v. Johnston, 104 U. S. 67. Concerning officers or trustees 

462; s. c, 3 Nat. Bank Cas. 32. chosen to effect the liquidation, see 

2. Chemical Nat. Bank v. Bailej, 12 Richards v. Attleborough Nat. Bank, 
Blatchf. (U. S.) 480; s. c, 1 Nat. Bank 14S Mass. 187; s. c, 3 Nat. Bank Cas. 
Cas. 260. 495; Merchants' Nat. Bank v. Gaslin, 

3. Ordway v. Central Nat. Bank, 47 41 Minn. 552. Concerning successor- 
Md. 217; s. c, I Nat. Bank Cas. 559; ship to a national bank which has gone 
Central Nat. Bank v. Connecticut into liquidation, see First Nat. Bank v. 
Mut. L. Ins. Co., 104 U. S. 54; s. c, 3 Marshall, 26 111. App. 440; s. c, 3 Nat. 
Nat. Bank Cas. 20. Concerning cred- Bank Cas. 401; Eaus i;. Exchange Bank, 
itor's remedy against national bank in 79 Mo. 1S2. 

voluntary liquidation, see Merchants' 4. Union Gold Mining Co. v. Rocky 

etc. Nat. Bank v. Trustees of Masonic Mountain Nat. Bank, i Colo. 531; s. c. 

Hall, 65 Ga. 603. Concerning amend- on other points, 96 U. S. 640, or i Nat. 

ment to act providing for suit to enforce Bank Cas. 151. See also Stevens v. 

individual liability of stockholders in Monongahela Nat. Bank, 88 Pa. St. 

cases of voluntary liquidation, see 157; s. c, 32 Am. Rep. 438. As to the 

Richmond v. Irons, 121 U. S. 27; s. c, nature of the violation required to cause 

17 Am. & Eng. Corp. Cas. 71; s. c, 3 forfeiture, see Brinckerhoff -v. Bost- 

Nat. Bank Cas. 211; Harvey v. Lord, wick, 88 N. Y. 52; s. c, 3 Nat. Bank 

II Biss. (U. S.) 144; s. c, 10 Fed. Rep. Cas. 591. 

236; Central Nat. Bank v. Connecticut 5. Bank of Montreal v. Fidelity Nat. 

Mut. L. Ins. Co., 104 U. S. 54; s. c, 3 Bank, i N. Y. Supp. 852; s. c, mem, 49 

Nat. Bank Cas. 20. Concerning the Hun (N. Y.) 607. 

powers of officers after the bank has 6. Piatt ^^ Beach, 2 Ben. (U.S.) 303; 

gone into liquidation, see Shrader v. s. c, i Nat. Bank Cas. 182; Staunton T). 

Manufacturers' Nat. Bank, 133 U. S. Wilkeson, 8 Ben. (U. S.l 357; s. c., 2 
16 C. of L.— 14 209 



Winding TTp. 



NA TIONAL BANKS. 



Beceiver. 



a judgment can be rendered against it, because suit is brought 
against the receiver and the comptroller of the currency.^ 

Suits by. — The receiver so appointed may sue for demands due 
the bank, either in his own name as receiver, or in the name of the 
bank,"'* and in order to sue for an ordinary debt or claim, he need 
not obtain the order of the comptroller of the currency ;^ nor can 
the debtors, when sued by the receiver, enquire into the legality 
of his appointment ;* but in determining to bring suit against the 
stockholders of the bank, to enforce their individual liability, the 
receiver is required to act under the direction of the comptroller, 
and subject to his decision of the matter.^ 

Appointment. — The ordinary appointment of a receiver, at the 
instance of the comptroller of the currency, to vi'ind up the affairs 
of a national bank in default, and the effect of such appointment 
have already been indicated. So where a national bank is insolvent 
and in process of voluntary liquidation, and its affairs are being 
greatly mismanaged by its managing agents to the injury of its 
creditors and stockholders, some of whom are being favored at 
the expense of others, a receiver may be appointed at the in- 
stance of one of the stockholders not favored; and a provisional 
receiver' may be appointed in such a case, even where the bank 
only has been made a defendant.® 



Nat. Bank Cas. 162; Frelinghuysen v. 
Baldwin, 12 Fed. Rep. 395, 397, 398; 
Price V. Abbott, 17 Fed. Rep. 506; 
Armstrong v. Ettleshon, 56 Fed. Rep. 
209. See also Kennedy v. Gibson, S 
Wall. (U. S.) 498; ». u., I Nat. Bank 
Cas. 17, 21. 

1. Case V. Terrell, 11 Wall. (U. S.) 
199; s. c, I Nat. Bank Cas. 67, holding 
that the receiver represents merely the 
bank, its stockholders and creditors. It 
is further ruled that such receiver holds 
only the estate and title of the bank in 
its assets, and has no greater rights in 
enforcing their collection than the bank 
itself would have had. Casey v. La 
Society Credit Mobilier, 2 Wood (U. 
S.) 77, 84; s. c, I Nat. Bank Cas. 285. 

2. National Bank v. Kenned}', 17 
Wall. (U. S.) 19; s. c, I Nat. Bank 
Cas. 87, 89; Kennedy v. Gibson, 8 
Wall. (U. S.) 19S; S.C., I Nat. Bank 
Cas. 17; Movius v. Lee, 30 Fed. Rep. 
298; Staunton v. Wilkeson, 8 Ben. (U. 
S.) 357, 359; s. c, 2 Nat. Bank Cas. 162, 
164; iSank of Bethel v. Pahquioque 
Bank, 14 Wall. (U. S.) 3S3; s. u., i Nat. 
Bank Cas. 77; Case v. Berwin, 22 La. 
An. 321. 

Set-ofE must have existed at time bank 
passed into hands of receiver. Balch v. 
V/ilson, 25 Minn. 299; s. c, 33 Am. Rep. 
A^jT a. c, 2 Nat. Bank Cas. 274; Steph- 



ens V. Schuchmann, 32 Mo. App. 333; 
s. c, 3 Nat. Bank Cas. 540. And see, 
as to right to plead set-off in general, 
Hade v, McVay, 31 Ohio St. 231; s. c, 
2 Nat. Bank Cas. 353. 

3. National Bank v. Kennedy, 17 
Wall. (U. S.) 19; s. c, I Nat. Bank Cas. 
87. 

4. Cadle V. Baker, 20 Wall. (U. S.) 
650; s. c, I Nat. Bank. 

5. Kennedy v. Gibson, 8 Wall. (U. 
S.) 498; s. c, 1 Nat. Bank Cas. 17, 20. 
The conclusiveness of the comptroller's 
determination is sustained in Casey v. 
Galli, 94 U. S. 673; s. c, I Nat. Bank 
Cas. 142; Bailej' v. Sawyer, 4 Dill. (U. 
S.) 463; s. c, I Nat. Bank Cas. 356. 
As to exemption from bond on bringing 
writ of error or appeal to United 
States Supreme Court, see Pacific Bank 
V. Mixter, 114 U. S. 463, 464. 

6. Elwood V. First Nat. Bank, 41 
Kan. 475. See further, as to when a 
receiver will be appointed. Merchants' 
etc. Nat. Bank v. Trustees of Mechan- 
ic's Hall, '63 Ga. 549; s. c, 2 Nat. Bank 
Cas. 220, upholding power of State 
court to try and reach assets before ap- 
pointment by federal court Irons v. 
Manufacturers' Nat. Bank, 6 Biss. (U. 
S.) 301; s. c, I Nat. Bank Cas. 203; 
Wright •?!. Merchants' Nat. Bank, i 
Flipp. (U. S.) 56S; s. c, I Nat. Bank 



210 



Windings Up. 



NATIONAL BANKS. 



Insolvency. 



Functions. — The receiver of a national bank, appointed by the 
comptroller of the currency, is the agent of the United States, 
and is limited as to his functions by the object of the receiver- 
ship, and the duties which it involves.^ 

3. Insolvency — Effect of. — When an association, organized under 
the National Bank act, becomes insolvent, and passes into the 
hands of a receiver under the provisions of that act, the respective 
rights a,nd liabilities then- existing between the bank and its credit- 
ors and debtors become fixed ;* and all its property and assets 
thereupon become subject, after satisfying the prior claim, if any, 
of the government on account of its notes, to disposal and ratable 
distribution among all its general creditors upon the principle of 
equality -^ nor can any subsequent lien be created, or right or 
preference obtained, in respect to any of the assets or property 
of the bank, which did not exist at that time.* 

What Constitutes. — The term "act of insolvency," used in the 
National Bank act, has been considered to mean any act which 
would be an act of insolvency on the part of an individual banker. 



Cas. 321. As to agent displacing re- 
ceiver, see McConville v. Gilmour, 36 
Fed. Rep. 277. 

1. Ellis V. Little, 27 Kan, 707; s. c, 41 
Am. Rep. 434; s. c, 3 Nat. Bank Cas. 
440. See Kennedy ■:'. Gibson, 8 Wall. 
(U. S.) 498; s. ^., I Nat. Bank Cas. 17, 
19, 20. 

Powers Concerning Property In Gen- 
eral. — Not to Exchange instead of sell- 
ing property. Ellis v. LiLtle, 27 Kan. 
707; s. c, 41 Am. Rep. 434; s. c, 3 Nat. 
Bank Cas. 440. Nor to withhold from 
owner property in custody of bank. 
Corn Exchange Bank v. Blye, loi N. 
Y. 303; s. c, 3 Nat. Bank Cas. 634. 

Power to Compromise a Debt. — The 
receiver may compromise doubtful 
debts on the order of a court of record 
of competent jurisdiction, such as a 
district court. /« re Piatt, i Ben. (U. 
S.) 534; s. c, I Nat. Bank Cas. iSi, 
182. As to when compromise will not 
be opened, see Henderson v. Myers, n 
Piiila. (Pa.) 616; s. c, 3 Nat. Bank Cas. 
759. As to want of authority to order 
composition of debts not bad nor doubt- 
ful, see Pierce v. Yates, 19 Alb. L. J. 
291;; s. c, 25 Int. Rev. Rec. 113; s. c, 2 
Nat. Bank Cas. 204. 

Control over bonds deposited to se- 
cure circulation lacking. Van Ant- 
werp V. Hulburd, 8 Blatchf. (U. S.) 
282; s. c, I Nat. Bank Cas. 219. 

Title to assets same as that of bank, 
so that receiver cannot avoid a pledge 
which the bank itself could not avoid. 
Casey v. La Society de Credit Mobilier, 



2 Wood (U. S.) 77, 84; s. ^., I Nat. 
Bank Cas. 285. 

Sale ty, under order of court when 
not set aside. In re Third Nat. Bank, 
9 Biss. (U. S.) 535. 

Claim Upon Proceeds of Collections. — 
See First Nat. Bank r'. Armstrong, 39 
Fed. Rep. 231. 

Belation to Courts. — Control of State 
court over. Ocean Nat. Bank v. Carll, 
7 Hun (N. Y.) 237; s. K.., with opinion, 
I Nat. Bank Cas. 792. Right of re- 
moval to federal court. Bird v. Cock' 
rem, 2 Wood (U. S.) 32; s. c, i Nat. 
Bank Cas. 284. Application to federal 
court. Harve3' v. Allen, 16 Blatchf 
(U. S.) 29; s". ^., 2 Nat. Bank Cas. 
*439, relying upon First Nat, Bank 
■u. Colby, 21 Wall. (U. S.) 609; 
s. c, I Nat. Bank Cas. 109. Rights 
where not a party to action, People's 
Bank v. Mechanics' Nat. Bank, 62 
How. Pr. (N. Y.) 422, 424, 425; s. c, 3 
Nat. Bank Cas. 670; Tracy v. First 
Nat. Bank, 37 N. Y. 523. 

2. Balch V. Wilson, 25 Minn. 299; 
s. c, 33 Am. Rep. 467; s. c, 2 Nat. 
Bank Cas. 274. 

3. See First Nat. Bank v. Colby, 21 
Wall. (U. S.) 609; s. c, I Nat. Bank 
Cas. lOg. 

4. Balch V. Wilson, 25 Minn. 299; 
s. c, 33 Am. Rep. 467; s. i,., 2 Nat. 
Bank Cas. 274. As to transfer of 
property' to indemnify sureties, before 
insolvency, see Price v. Coleman, 22 
Fed. Rep. 694, 696, 697. As to effect 
of insolvency on collections, see Manu- 



211 



Winding Up. 



NATIONAL BANKS. 



Preferences. 



and not simply such an act as authorizes the comptroller to 
appoint a receiver.^ 

Remedies After. — The property of a national bank, attached at 
the suit of an individual creditor after the bank has become in- 
solvent, cannot be subjected to sale for the payment of his de- 
mand against the claim for the property by a receiver of the bank 
subsequently appointed.^ Nor can an injunction issue before 
judgment against the receiver of a national bank.* And a tax 
levied on the property of a national bank subsequent to its in- 
solvency is subordinate to the rights of a receiver appointed after 
such levy.* 

4. Preferences — In General. — The provision of the National Bank 
act which prohibits all transfers by any national banking associa- 
tion made after the commission of an act of insolvency, or in con- 
templation thereof, with a view to the preference of one creditor 
to another, is directed to a preference,^ and not to the giving of 
security when a debt is created;® and if the transaction be free 
from fraud in fact, and is intended merely to adequately protect a 
loan made at the time, the creditor can retain property transferred 
to secure a loan until the debt is paid, though the debtor is insol- 
vent, and the creditor has reason at the time to believe that to be 
the fact.'^ But it is sufficient to invalidate such a transfer, that it 



facturers' Nat. Bank v. Continental 
Bank, 148 Mass. 553. Also Philadel- 
phia Nat. Bank v. Dowd, 38 Fed. Rep. 
172. 

1. Irons V. Manufacturers' Nat. Bank, 
6 Biss. (U. S.) 301; s. c, I Nat. Bank 
Cas. 203. See also to the effect that 
the word "insolvency," in such connec- 
tion, is synonymous with the same 
word as used in the bankrupt act, Case 
V. Citizens' Nat. Bank, 2 Wood (U. 
S.) 23; s. c, I Nat. Bank Cas. 276. As ' 
to what is sufficient evidence of insol- 
vency, see Wheelcck v. Kost, 77 111. 
296; s. c, I Nat. Bank Cas. 406. 

2. First Nat. Bank ti. Colby, 21 Wall. 
(U. S.) 6og; s. v,., : Nat. Bank Cas. 109. 
See also Harvey v. Allen, 16 Blatchf. 
(U. S.) 29; s. c, 2 Nat. Bank Cas. 439. 

Attacliinent. — Indeed, according to a 
recent ruling of the Supreme Court of 
the United States, it seems that there 
can be no attachment of a national 
bank before judgment, whether it be in- 
solvent or otherwise. Pacific Nat. 
Bankn. Mixter, 124 U. S. 721; s. c, as 
Butler V. Coleman, 3 Nat. Bank Cas. 
291. Compare previous rulings in 
Market Nat. Bank w. Pacific Nat. Bank, 
30 Hun (N. Y.) 50; s. c, 3 Nat. Bank 
Cas. 672; National Shoe etc. Bank v. 
Mechanics' Nat. Bank, 89 N. Y. 467; 
s. c, 3 Nat. Bank Cas. 601; Raynor v. 



Pacific Nat. Bank, 93 N. Y. 371; s. c, 3. 
Nat. Bank Cas. 624. 

3. Warner •:;. Armstrong (Cin. Super.. 
Ct), 21 W.L. Bull. 124. 

4. Woodward v. Ellsworth, 4 Colo. 580. 
No Priority to United States. — See 

Cook Co. Nat. Bank v. United States,. 
107 U. S. 445; s. c, I Am. & Eng. 
Corp. Cas. 533; s. c, 3 Nat. Bank Cas. 
68; reversing (9 Biss. (U.S.) 55, or 2 
Nat. Bank Cas. 128. Consult also 
Jackson v. United States, 20 Ct. of CI. 
298. But compare Schmidt v. First 
Nat. Bank, 22 La. An. 314; s. c, i Nat. 
Bank Cas. 505. . 

Set-off of Deposits. — See under De- 
posits. 

Control of Insolvent National Bault. — 
See Jackson v. United States, 20 Ct. of 
CI. 298, 305. _ 

5. The object sought to be accom- 
plished by the provision is the distribu- 
tion of the assets of the bank fairly and 
without preferences. Corn Exchange 
Bank w. Blye, loi N. Y. 303; s. c, 3 
Nat. Bank Cas. 634. See Robinson v. 
National Bank, 81 N. Y. 385; s. c.,- 37 
Am. Rep. 508. 

6. See Casey v. La Society de Credit 
Mobilier, 2 Wood (U. S.) 77; s. c, I 
Nat. Bank Cas. 285. 

7. Armstrong tj. Chemical Nat. Bank,.. 
41 Fed. Rep. 234, 238-39, 



212 



Suits and Semedies. NA TIONAL BANKS Jurisdiction Over. 

is made in contemplation of insolvency, and either with a view to 
prevent the application of the assets of the bank in the manner 
prescribed by the statute, or with a view to the preference of one 
creditor to another.^ 

Party Who Must Know or Contemplate Insolvency. — Yet to make 
transfers, assignments, deposits and payments void, under the 
National Bank act, it is only necessary that the insolvency should 
be in the contemplation of the bank making the transfers, etc., 
and not that it should also be known to or contemplated by the 
party to whom they are made.^ 

5. Claims Against Suspended Bank — Not Confined to Strict Debts. 
— The claims against an insolvent national bank on which a divi- 
dend may be declared, are not limited to debts in any strict sense, 
but include the claim of a person who has left United States 
bond§ on special deposit for safekeeping, and has not been able to 
obtain them again.^ 

Amount Paid on Claitn. — The payment of a creditor of an in- 
solvent national bank by the comptroller must be based on the 
amount due on the adjudicated claim at the date of the failure, 
and not on the amount due when the claim is adjudicated.* 

XVI. Sttits and Remedies — 1. Jurisdiction Over Suits or Proceed- 
ings. — ^The jurisdiction of the federal courts over actions concern- 
ing national bank, has been upheld in the case of a suit to quiet 
title to land brought by such a bank,** but not in an action brought 
by assignors of national bank against a receiver of the bank, be- 
cause they had been compelled to contribute as owners of such 

As to cashier's transfer of securities Fed. Rep. 776, 778. As to set-off by 

Jield a bona fide purchase and not a depositor's assignee, as amounting to a 

preference, see Tuttle v. Frelinghuysen, preference, see Venango Nat. Bank v. 

38 N- J. Eq. 12; s. c, 3 Nat. Bank Cas. Taylor, 56 Pa St. 14; s. c, i Nat. Bank 

576. Cas. 842. 

1. National Security Bank v. Butler, 2. Case v. Citizens' Bank, 2 Woods 

129 U. S. 223; s. c, 3 Nat. Bank Cas. (U. S.) 23; s. c, i Nat. Bank Cas. 276. 

320. As to transfers to national bank by But compare Roberts ti. Hill, 24 Fed. 

its insolvent cashier by way of prefer- Rep. 571- 

ence, see Witters v. Bowles, 32 Fed. 3. Turner t;. First Nat. Bank, 26 Iowa 

Rep. 762. One creditor held not en- 562, 565; s. c, i Nat. Bank Cas. 454, 

titled to preference over the rest, where 457-8. 

fraudulent wrecking of bank by its of- As to when action lies against re- 

ficers. Citizens' Nat. Bank v. Dowd, ceiver of suspended national bank by 

35 Fed. Rep. 340. As to when de- pledgee of stock for refusal to transfer it 

positor of draft with nationaj bank on books of bank, see Case v. Bank, 100 

which becomes insolvent may recover U. S. 446, 456; s. c, 3 Meyers' Fed. Dec. 

proceeds from collecting agent of bank, 231, 236; s. c, 2 Nat. Bank Cas. 47, 56. 

see Craigie v. Smith, 14 Abb.N. C. (N. 4. White v. Knox, iii U. S. 784; s.c, 

Y.) 409. Mortgage of all his property 3 Nat. Bank Cas. 12S, 129. Concerning 

by cashier and stockholder of insolvent interest on claims, see National Bank v. 

national bank to secure a depositor, as Mechanics' Nat. Bank, 94 U. S. 437; 

amounting to a preference. Gatch v. s. c, i Nat. Bank Cas. 133; Chemical 

Fitch, j4 Fed. Rep. 566, 569-70. As to Nat. Bank v. Bailey, 12 Blatchf. (U. S.) 

allegations concerning transfers by 480; s. c, i Nat. Bank Cas. 260. 

bank, not open to objection as stating 5. Reynolds v. Crawfordsville First 

merely conclusions of law, see Brown Nat. Bank, 112 U. S. 405; s. i,., 3 Nat. 

■u. Carbonate Bank of Leadville, 34 Bank Cas. 131. 

213 



Suits and Eemedies. NA TIONAL BANKS. Parties and Pleadings. 

stock toward the liabilities of the bank, on account of the failure 
to fill in the name of the assignee in the transfer book of the 
bank.^ 

2. Parties and Pleadings — Parties. — In regard to actions by and 
against national banks, as in the case of other actions, the courts 
have been concerned with questions, not generally involving mat- 
ters peculiar to the present subject, respecting necessary and 
proper parties,^ real and nominal parties,^ and joinder of parties.* 

Pleadings. — Similarly in regard to pleadings in actions by and 
against national banks, the courts have passed upon the sufficiency 
of the allegations of the complaint,^ the mode of making such 
allegations,® the denials in the answer' and the right of set-off or 
counterclaim.^ 

3. Maintenance of Actions— /;« General. — A State statute is not 
in conflict with the National Banking act where it authorizes the 
State banking institutions to become national banks and to con- 
tinue to use their corporate names for the purpose of protect- 
ing and defending suits instituted by and against it.® 

Actions by National Banks. — And a national bank may main- 
tain an action in its own name against an endorser of a promissory 
note of which it is the purchaser or holder, irrespective of the 
question whether it was authorized to acquire title to notes by 
purchase or not.^** 

Actions Against National Banks. — But an assignee in bank- 
ruptcy cannot maintain an action against a national bank for the 

1. Le Sassier v. Kennedy, 123 U. S. ner v. First Nat. Bank, 26 Iowa 562; 
521; s. c., 3 Nat. Bank Cas. 2S8. s. c, i Nat. Bank Cas. 458. 

Against National Bank Officers. — For 3. Foss v. First Nat. Bank, i Mc- 

note of the conflicting decisions in re- Crary (U. S.) 474; s. u., 2 Nat. Bank 

gard to the jurisdiction of State or Fed- Cas. 104. 

eral courts over offences committed by, 4. Kennedy v. Gibson, 8 Wall. (U. 

. see under Officers in General, dis- S.) 498; s. c, i Nat. Bank Cas. 17. 

cussion of their criminal liabilities. 5. Farmers & Mechanics' Nat. Bank 

As to jurisdiction of State court over v. Rogers, 17 N. Y. St. Rep. 381; s. c. 3 

an indictment for forgery against a Nat. Bank Cas. 683; Bunday v. Cocke, 

book-keeper in a national bank, see 128 U. S. 185; s. c, 3 Nat. Bank Cas. 

Hoke V. People, 122 111. i;ii; s. c, 3 Nat. 316; Movius v. Lee, 30 Fed . Rep. 298; 

Bank Cas. 372. ' Third Nat. Bank v. Teal, 5 Fed. Rep. 

Keeeiver's Relation to. — The receiver 503. 

of a national bank in process of liqui- 6. Schuyler Nat. Bank v. Bullong, 24 

dation, is an officer of the United States, Neb. 821; s. c, 3 Nat. Bank Cas. 558. 

so as to be entitled to sue in the federal 1. National Bank v. Orcutt, 48 Barb, 

courts. Armstrong v. Ettlesohn, 36 (N. Y.) 256. 

Fed. Rep. 209. Nor does a receiver of 8. Welles v. Stout, 38 Fed. Rep. 807; 

a national bank estop himself from Louis Snyder's Sons Co. v. Armstrong, 

questioning the jurisdiction of the court 37 Fed. Rep. 18; Armstrong 71. Warner, 

by causing himself to be substituted as 21 W. L. Bull. (Cin. Super. Ct.) 136. 

defendant in an action against the bank. 9. Thomas v. Farmers' Bank, 46 Md. 

Cadle Z). Tracy, II Blatchf. (U. S.) loi. 43; s. c, 2 Nat. Bank Cas. 248. See 

o. c, I Nat. Bank Cas. 230. also Atlantic Nat. Bank v. Harris, 118 

2. See Cleveland xk Shoeman, 40 Mass. 147; s. c, 2 Nat. Bank Cas. 454. 
Ohio St. 176; s. c, 3 Nat. Bank Cas. 10. National Pemberton Bank t'. Port- 
701: Brinckerhoff v. Bostwick, 88 N. er, 125 Mass. 333; s. c, 28 Am. Rep. 
Y. 52; a. c, 3 Nat. Bank Cas. 591; Tur- 235; s. c, 2 Nat. Bank Cas. 266. Com- 

214 



Suits and Bemedies 



NA TIONAL BANKS. 



By and Against. 



value of shares of its stock belonging to the bankrupt, which the 
bank, under claim of lien against the bankrupt, refused to trans- 
fer to the assignee.' 

Abatement of Actions. — A suit against a national bank to en- 
force the collection of a demand is abated by a decree dissolving 
the corporation, and forfeiting its rights and privileges.^ 

Removal of Causes. — This subject has already been considered 
in discussing location and citizenship, and other topics.^ 

4. Trials. — The litigated matters concerning trials of action by 
and against national banks include dismissal,* verdict," the attor- 
ney conducting the suit,® and the proof of the bank's corporate 
existence.''' 

5. Appeals. — In order to give the United States supreme court 
jurisdiction on appeal from a State supreme court, under the 
National Banking act, the "title, right, privilege or immunity 
specially set up or claimed," must be claimed by the plaintiff in 
error for himself, and not for a third person, in whose title he 
has no interest.* ■ 

6. Remedies By and Against. — The remedies by and against 
national banks, which have been the subject of adjudication in 



pare Ticonic Nat. Bank v. Bagley, 68 
Me. 249; s. !_., 2 Nat. Bank Cas. 245. 

1. Meyers v. Valley Nat. Bank, 18 
Bankr. Reg. 34; s. c, 2 Nat. Bank Cas. 
156. But compare generally, as to liti- 
gation by such assignee. See In re. 
Duryea, 17 Bankr. Reg. 495; s. c, 2 
Nat. Bank Cas.' 170. The right of a 
borrower's assignee in bankruptcy to 
sue for double interest where usury is 
taken, has already been considered in 
discussing interest. As to right to main- 
tain action against national bank on 
claim disallowed by receiver, see Bank 
of Bethel v. Pahquioque Nat. Bank, 14 
Wall. (U. S.) 383; s. c, I Nat. Bank 
Cas. 77. 

2. First Nat. Bank v. Colby, 21 Wall. 
(U. S.) 609; s. I,., I Nat. Bank Cas. 
109. 

3. Against right of removal to federal 
court, of action against United States 
court commissioners for alleged illegal 
costs and fees, see Berchley -o. Gilbert, 
8 Blatchf. (U. S.) 147. 

4. Reynolds v. Crawfordsville First 
Nat. Bank, 112 U. S. 405; s. c, 3 Nat. 
Bank Cas. 131. 

B. Logan Co. Nat. Bank t^.Townsend 
(Ky. 1887), 3 S'. W. Rep. 122; s. c, 3 
Nat. Bank Cas. 44S. 

6. Kennedy v. Gibson, 8 Wall. (U. S.) 
498; s. u., I Nat. Bank Cas. 17, 19. 

7. Hungerford Nat. Bank v. Van 
Nostrand, 106 Mass. 559, 560. As to 
want of power of court to grant to re- 



ceiver order compelling bank to pay 
money into court, see Balestier v. Me- 
tropolitan Nat. Bank, 43 Hun (N. Y.) 

564- 

8. Miller v. National Bank, 106 U. S. 
S42; s. c, 3 Nat. Bank Cas. 52, relying, 
in support of general principle, upon 
Owings V. Norwood, 5 Cranch (U. S.) 
344; Montgomery v. Hernandez, 12 
Wheat. (U. S.) 129; Henderson f. Ten-- 
nessee, 10 How. (U. S.) 323; Wynn v. 
Morris, 20 How. (U. S.) 5; Hale v, 
Gaines, 22 How. (U. S.) 160; Verden 
V. Coleman, i Black (U. S.) 472, and 
Long V. Converse, gi U. S. 105. 

Certificate of Division of Opinion.— 
Concerning requisites for certificate o( 
division of opinion to United States 
supreme court, see Williamsport Nat. 
Bank v. Knapp, 119 U. S. 357, 360; s. >,-, 
3 Nat. Bank Cas. 184 (s. c, reported 
below, 15 Fed. Rep. 333), citing Saun- 
ders V. Gould, 4 Pet. (ij. S.) 392; United 
States V. Bailey, 9 Pet. (tj. S.) 267; 
Weeth V. New England Mortgage Se- 
curity Co., 106 U. S. 605; California 
Cut Stone Paving Co. v. Monitor, 113 
U. S. 609, and Waterville v. Van Slj-ke, 
116 U. S. 699. For a question held too 
vague and general to be answered, see 
United States v. Northway, 120 U. 
S. 327; s. c, 3 Nat. Bank Cas. 199, 
201. 

Review on Appeal. — See Prosser -j. 
First Nat. Bank, io6 N. Y. 677; s. c, 3 
Nat. Bank Cas. 646, 648; Stanley v 



215 



Beflnition. NATIONAL CORPORATIONS. Definition. 

the courts, include those arising on mistake in payment,^ on in- 
formation for forfeiture of charter,* or in case of voluntary liqui- 
dation,^ or concerning garnishment* or injunction." 

7. Attachment — Against National Banks. — There has been much 
■conflict upon the question of the right to the remedy by attach- 
ment against national banks, but the latest view, adopted by the 
Supreme Court of the United States and so likely to prevail, is 
that such remedy, since the act of 1873, cannot be invoked in the 
federal courts any more than in the State courts, and that its 
denial is not confined to cases of actual or contemplated insol- 
vency on the part of the bank.** 

By National Banks. — A national bank has been held entitled to 
attach the shares of a stockholder therein for his debt due the 
bank.'^ 

NATIONAL CORPORATIONS— (See CORPORATIONS, vol. 4, p. 
184; Foreign Corporations, vol. 8, p. 329; Franchises, vol. 
S, P..584; National Banks; Taxation) — Creation. — Corpora- 
tions may be created by act of congress, and, in order to 
distinguish these from the corporations existing under the laws 
of the States, the term national corporations has recently 
come into use. The constitution of the United States confers 
no direct power on congress to create corporations, but the 
power is conceded to exist whenever it is deemed an appropriate 
measure to carry into effect any of the powers expressly given by 
the constitution.^ This power has been exercised in the creation 

Albany Co., 121 U. S. 535; s. c, 3 Nat. 373, and in Bank of Montreal v. Fi- 

Bank Cas. 268, 273. " delity Nat. Bank, 49 Hun (N. Y.) 607 

Point First Taken on Appeal. — See mem.\ s. c., i N. Y. Supp. 852. But 

Fostier v. New Orleans Nat. Bank, 112 comfare contra, previously, Continen- 

U. S. 439; ». t., 3 Nat. Bank Cas. 140, tal Nat. Bank v. Folsom, 78 Ga. 449; 

145. s. c, 3 Nat. Bank Cas. 350; Peoples' 

1. See Manufacturers' Nat. Bank v. Bank -r'. Mechanics' Nat. Bank, 62 How. 
Swift, 70 Md. 515; s. c, 14 Am. St. Pr. (N. Y.) 422; s. c, 3 Nat. Bank Cas. 
Rep. 381, and note 387. Consult also 672; Raynor v. Pacific Nat. Bank, 93 
Oddie V. National City Bank, 45 N. Y. N. Y. 371; s. c, 3 Nat. Bank Cas. 624; 
735; s. c, 6 Am. Rep. 160; National National Shoe etc. Bank v. Mechanics' 
Park Bank v. Seaboard Bank, 114 N. Nat. Bank, 89 N. Y. 467; s. c, 3 Nat. 
Y. 28. But compare Merchants' Nat. Bank Cas. 601. The constitutionality 
Bank v. National Eagle Bank, loi Mass. of the statutory provision on the sub- 
281; s.c, 100 Am. Dec. 120. ject is upheld in Chesapeake Bank v. 

2. Trenholm v. Commercial Nat. First Nat. Bank, 40 Md. 269; s. c, i Nat. 
Bank, 38 Fed. Rep. 323. Bank Cas. 531. 

3. Merchants' etc. Nat. Bank 7'. Trus- 7. Hagarx'. Union Nat. Bank, 63 Me. 
tees of Masonic Hall, 65 Ga. 603. 509, 513; s. c, i Nat. Bank Cas. 523. 

4. Havens v. National City Bank, 6 8. i Kent Comm. 248; Story Const., 
Thomp. & C. (N. Y.) 346; s. c, i Nat. § 1259; Hare Am. Const. Law 115. 
Bank Cae. 783. This principle was maintained in the 

5. Shoemaker v. National Mechanics' discussions relating to the granting of 
Bank, 2 Abb. (U. S.) 416; s. c, i Nat. charters by congress to the national 
Bank Cas. 169, 170. banks, first in 1791 and again in 1816, 

6. Pacific Nat. Bank 7;. Mixter, 124 and was established by the decision of 
U.S. 721; s. c, as Butler v. Coleman, the Supreme Court of the United States 
3 Nat. Bank Cas. 291 (1888), followed in construing the later of the above acts 
in Saiford v. First Nat. Bank, 61 Vt. of incorporation. The earlier act was 

216 



Definition. 



NATIONAL CORPORATIONS. 



Definition. 



of corporations intended to operate either within the United 
States generally,' or within the District of Columbia* and the 
Territories 3 alone, or outside the United States.* The power to 



passed by the two houses of congress, 
and its constitutionaHtj was earnestly 
objected to in the cabinet, but the act 
■was approved by President Washington. 
The charter of the first bank of the 
United States having expired, the sec- 
ond was estabhshed by act of 1816, and 
in 1819 the constitutionality of the legis- 
lation came before the supreme court 
for decision in M'Culloch v. Maryland, 
4 Wheat. (U. S.) 316: The powers of 
congress were considered by Chief 
Justice Marshall, in delivering the 
opinion of the court, and it was held 
that the power of creating a corpo- 
ration, though appertaining to sover- 
eignty, was not an independent power, 
"but merely a means by which other 
objects are accomplished; that the ab- 
sence of a grant of the power to create 
a corporation did not mean a with- 
holding of the power; that such power 
might be implied as a necessary means 
for the execution of the general powers 
of congress; that congress was to de- 
termine the necessity of the use of such 
means, and that the court, finding that 
the act was an appropriate measure and 
not prohibited, would not enquire into 
the degree of its necessity. In Osborn 
V. Bank of United States, 9 Wheat. 
(U. S.) 738, it was admitted that con- 
gress could not create a corporation for 
its own sake or for private purposes; it 
could be created for national purposes 
only, though it would undoubtedly be 
capable of transacting private as well 
as public business. The charter of the 
second bank of the United States ex- 
pired by limitation in 1836. The sys- 
tem of national banks under the general 
law was established in 1863. See Na- 
tional Banks. The subject has been 
repeatedly settled and the power sus- 
tained. Story Const., § 1271. 

1. These are the national banks, rail- 
roads, telegraph companies, and corpo- 
rations not created for profit. An ex- 
ample of such a railroad is the Union 
Pacific Railway Company. See Pacific 
Railroad Removal Cases, 115 U. S. i; 
California t;. Railroad Co.'s, 127 U. S.i. 
The Northern Pacific Railroad Com- 
pany was incorporated hy act of con- 
gress of July 2nd, 1S64, which provided 
that the previous consent of the legis- 
lature of each State should be required 
before constructing the road in that 



State. 13 Stat, at L. 365, 372. The 
Atlantic & Pacific Railroad Co. was 
chartered by act of congress of July 
27th, 1866. 14 Stat, at L. 292. And the 
Texas Pacific Railroad Co. was char- 
tered by act of congress of March 3rd, 
1871. 16 Stat, at L. 573. Powers to 
extend their lines over the public do- 
main, post roads and navigable waters 
are conferred upon telegraph companies 
organized under State laws by Rev. 
Stat., §5 5263, 5269. Congress has char- 
tered such corporations as the Freed- 
man's Saving and Trust Co. (13 Stat, 
at L. 510); National Asylum for Dis- 
abled Volunteer Soldiers (14 Stat, at L. 
10); Centennial Board of Finance (17 
Stat, at L. 203). 

2. The riglit to exercise exclusive 
legislation is given by the Constitution, 
art. I, § 8, cl. 18. This includes the 
granting of charters to corporations, 
and instances of such charters may 
be found in various statutes passed by 
congress relating to the District of Co- 
lumbia. 

3. ' The congress shall have the power 
to dispose of and make all needful rules 
and regulations respecting the territory 
or other property belonging to the 
United States." Const. U. S.. art. 3, 
§ 3, cl. 2. The legislative assemblies of 
the Territories cannot grant special 
charters, but may \>y general laws per- 
mit corporations to be formed for min- 
ing, manufacturing and other industrial 
pursuits, or the construction or oper- 
ation of railroads, wagon roads, irrigat- 
ing ditches and the colonization and 
improvement of lands in connection 
therewith, or for colleges, seminaries, 
churches, libraries or any benevolent, 
charitable or scientific association. 
Rev. St., § 1889. A corporation cre- 
ated hj a territorial legislature be- 
comes, after the admission of the Terri- 
tory as a State, a corporation of the 
State. Kansas Pac. R.Co. v. Atchison 
etc. R. Co., 112 U. S. 414. 

4. In 1889 the Maritime Canal Co. 
of Nicaragua was incorporated for con- 
structing and operating a ship canal be- 
tween the Atlantic and Pacific Oceans 
tiirough the territory of the Republics 
of Nicaragua and Costa Rica, with its 
principal office in the city of New York. 
Act of February 20th, 18S9; 2C Stat, at 
L. 673. 



217 



Definition. 



NA TIONAL CORPORA TIONS. 



Definition. 



grant many of these franchises is referred to the power to regu- 
late commerce among the several States as well as to provide for 
postal accommodations and military exigencies.^ 

Powers. — In granting franchises to be exercised in the District 
of Columbia and the Territories, congress may probably confer 
powers on a corporation coextensive with those which it may 
confer on a natural person; but franchises which may be con- 
ferred on a corporation, to be exercised within the States, are 
limited to those which are the appropriate means to carry into 
execution the express powers of the general government.** 

Taxation. — National corporations depending for their existence 
upon the fact that they are agencies of the federal government 
must be free to discharge the duties which they have undertaken 
to perform. Therefore, the question whether they are exempted 
from taxation by the States, depends upon the effect of the tax. 
A tax upon their property does not have the necessary effect of 
depriving them of the power to serve the government as they 
were intended to serve it, or hinder the efficient exercise of their 
power, and may be imposed by the States. But not so a tax 
upon their operations, which is a direct obstruction to the exercise 
of federal powers.* It follows that their franchises cannot be 



1. California v. Central Pac. Rail- 
road Co., 127 U.S. I, in which B LATCH - 
FORD, J., says: "The power to con- 
struct or to authorize individuals or 
corporations to construct national high- 
ways and bridges from State to State, 
is essential to the complete control and 
regulation of interstate commerce. 
Without authority in congress to estab- 
lish and maintain such highways and 
bridges, it would be without authority 
to regulate one of the most important 
adjuncts of commerce. This power in 
former times was exerted to a very 
limited extent, the Cumberland or 
national road being the most notable 
instance. Its exertion was but little 
called for, as commerce was then mostly- 
conducted by water, and many of our 
statesmen entertained doubts as to the 
existence of the power to establish ways 
of communication by land. But since, 
in consequence of the expansion of the 
country', the multiplication of its pro- 
ducts and the institution of railroads and 
locomotion by steam, land transporta- 
tion has so vastly increased a sounder 
consideration of the subject has pre- 
vailed and led to the conclusion that 
congress has plenary power over the 
whole subject. Of course the authority 
of congress over the Territories of the 
United States, and its power to grant 
franchises exercisable therein, are, and 
ever have been undoubted. But the 



wider power was very freely exercised, 
and much to the general satisfaction, in 
the creation of the vast system of rail- 
roads connecting the East with the Pa- 
cific, traversing States as well as Terri- 
tories, and employing the agency of 
State as well as federal corporations." 

2. Curtis' Note on National Corpora- 
tions; 24 Am. & Eng. R. Cas. 21; 21 
Am. Law Rev. 258. 

3. In M'CuUoch v. Maryland, 4 
Wheat. (U. S.) 316, the tax imposed by 
the State of Maryland upon the notes 
of the Bank of the United States was 
held to be unconstitutional. "The in- 
stitution was prohibited from issuing 
notes at all except upon stamped paper 
furnished by the State, and to be paid 
for on delivery, the stamp upon each 
note being proportioned to its denomi- 
nation. The tax, therefore, was not 
upon any property of the bank, but up- 
on one of its operations — in fact, upon 
its right to exist as created. It was a 
direct impediment in the way of a gov- 
ernmental operation performed through 
the bank as an agent. It was a very 
different thing, both in its nature and 
effect, from a tax on the property of the 
bank. No wonder, then, that it was 
held illegal. But even in that case the 
court carefully limited the effect of the 
decision. It does not extend, said the 
Chief Justice, to a tax paid by the 
real property of the bank in common 

218 



Definition. 



NATIONAL GOVERNMENT. 



Definition. 



taxed by the States in which they may operate.^ 

Jurisdiction in Suits. — Except in the case of national banks, a 
suit by or against a corporation of the United States is a suit 
arising under the laws of the United States within the Jurisdiction 
act, and, therefore, is within the jurisdiction of the federal courts 
and removable thereto when brought originally in a State court.** 

NATIONAL GOVERNMENT.— A "national government" is the 
government of the people of a single State, or nation, united as a 
community by what is termed the social compact, and possessing 
complete and perfect supremacy over persons and things so far as 
they can be made the lawful objects of civil government. ^ 

NATIONS, LAW OF. — See International Law, ii Am. and 
Eng. Encyc. of Law 431 ; Military Law. 

NATURE; NATURAL.— Are employed with little or no deviation 
from the vernacular meaning.* 



■with the other real property in the 
State, nor to a tax imposed on the in- 
terest which the citizens of Maryland 
may hold in the institution in common 
with the other property of the same 
description throughout the State." 
And see Union Pac. R. Co. v. 
Peniston, 18 Wall. (U. S.) 5. The 
same distinction was made in the case 
ofOsborn v. Bank of United States, 
9 Wheat. (U. S.) 738, in which the 
State of Ohio laid a tax on the opera- 
tions of the bank. Where the tax is 
not imposed upon the franchise or 
right of the corporation to exist and 
perform the functions for which it was 
brought into being, but is exclusively 
upon its real and personal property, 
taxed in common with all other prop- 
erty in the State of a similar character, 
such property is* not exempt. Thomp- 
son V. Union Pac. R. Co., 9 Wall. (U. 
S.) 579; Union Pac. R. Co. -z'. Peniston, 
18 Wall. (U. S.) 5. A company incor- 
porated by an act of congress is not a 
"foreign corporation," within the mean- 
ing of the revenue act of Pennsylvania, 
and is not obliged to take out a licence 
and pay a tax for doing business in that 
State. Commonwealth v. Texas etc. R. 
Co., 98 Pa. St. go. The property of a 
telegraph company, chartered hy a State 
but operating under Rev. Stat, §§ 5263- 
5269 {ante 2), is subject to taxation 
by a Scate as an individual's would be; 
but an injunction restraining it from 
operating its lines over post roads until 
the tax is paid is void. Telegraph Co. 
V. Atty. Gen., 125 U. S. 530. 

X. The franchise is given for a public 
purpose, and to suffer a State to tax it 
would be a concession of the power to de- 
stroy it. This would be not only derog- 
atory to the dignity, but subversive of the 



powers of the government and repugnant 
to its paramount sovereignty. California 
V. Central Pac. Railroad Co., 127 U. S. i. 

2. Theexception in the caseof national 
banks was made by U. S. act July 12th, 
1882, since incorporated in the Jurisdic- 
tion and Removal acts of 1887 and 18SS. 
The legal proposition on which the 
statement in the text is founded was an- 
nounced by the U. S. Supreme Court 
in the Pacific Railroad Removal Cases, 
115 U. S. I. This decision was founded 
on Osborn v. Bank of United States, 9 
Wheat. (U. S ) 738, but the court was 
divided, Waite, C. J., and Miller, J., 
dissenting on the ground that the words 
"arising under the constitution or laws 
of the United States," in the Jurisdic- 
tion act, should not have given them the 
broad meaning they had when used by 
Chief Justice Marshall in Osborn v. 
Bank of the United States. 

Eminent Domain. — The right of emi- 
nent domain exists in the government 
of the United States, and may be exer- 
cised bv it within the States, so far as is 
necessary to the enjoyment of the 
powers conferred upon it by the con- 
stitution. Kohl V. United States, gi U. 
R. 367. It seems to follow that this 
power may be delegated to national 
corporations; it has been so delegated 
to be exercised within the Territories. 
Curtis' Notes, 24 Am. & Eng. R. Cas. 25; 
21 Am. Law Rev. 262. 

3. Piqua Bank v. Knoup, 6 Ohio St. 
342-393. 

A federal government is distinguished 
from a national government by its be- 
ing the government of a community of 
independent and sovereign states united 
b3' compact. Piqua Bank v, Knoup, 6 
Ohio St. 342-393. 

1. And. L. Diet. 



219 



nature and Character. 



NATURAL GAS. 



Nature and Character, 



NATURAL ALLEGIANCE.— See also ALLEGIANCE, Vol. i, p. 
490. That allegiance which is due from one in view of his birth 
within a country, as distinguished from local allegiance.* 

NATURAL AND ARTIFICIAL PERSON (Distinguished).— See also 
Person. See note 2. 

NATURAL CHILDREN.— See BASTARDY, 2 Am. & Eng. Encyc. 
of Law 129; Children, 3 Am. & Eng. Encyc. of Law 230. 

NATURAL GAS — I. Natuee and Character. — Inflammable gas 
is formed in great abundance within the earth in connection with 

derstood in the trade dealing with it; 
therefore when tincture of opium was 
demanded and a tincture was sup- 
plied one-third less in strength than the 
article according to the recognized 
standard (z. e., the British Pharma- 
copoeia), held that the article supplied 
was not of the "nature or quality" de- 
manded (White V. Bywater. 19 Q^ B. 
D. 582; 51 J. P. 821; 3 Times Rep. 
631); but skimmed milk is a good sup- 
ply for a demand of "milk" within this 
section. Lanet). Collins, 54 L. J. M. C. 
76; hQ^B.D. 193. 

Nature of the Offence. — Where by 
statute a sentence awarding punish- 
ment shall set forth the "nature of the 
offence," this does not mean that merely 
the name of the ofBence shall be given. 
"It means clearly a setting forth of the 
facts, shortly but intelligently, by which 
the offence was committed." Soutar 
■u. Stirling, 25 Sc. L. Rep. 499. 

"Natural Oyster Bed." — A natural, as 
distinguished from an artificial, oyster- 
bed is one not planted hy man, and in 
any shoal, reef or bottom where oysters 
are to be found growing, not sparsely, 
or at intervals, but in a mass or strat- 
um, and in sufficient quantities to be 
valuable to the public. State v. Willis, 
104 N. Car. 764. 

"Natural State of" a Stream. — The 
natural state of a stream is that in 
which the stream is under the ordinary 
operation of the phj'sical laws which 
affect it. This may be different at 
different seasons of the year and yet 
be ordinary' by the recurrence of the 
same condition about the same season 
every year. It may ordinarily be high 
a portion of the season and low at 
another portion; yet as these are ordi- 
nary by reason of their annual or fre- 
quent occurrence, so that a variance 
therefrom is an exception, they are the 
natural condition of the stream. Dor- 
man V. Ames, 12 Minn. 451. 

"Natural stream" properly signifies 
a river fiowing from its source to the 
ocean, or an outlet between one interior 



The words "without know-ledge of 
the nature transaction," may be very 
ambiguous when embodied within an 
instruction to a jury. King v. Ward, 
74 Me. 349. 

"Natural lives" was construed to be 
equal to joint lives and the life of the 
survivor in Douglas v. Parsons, 22 
Ohio St. 526. See also Annuity, i 
Am. & Eng. Encyc. of Law 592. 

Natural Presumptions. — See Pre- 
sumptions. 

"Natural and Beasonalile Wear and 
Tear Excepted." — In an article of agree- 
ment for the sale of real estate, by 
which the vendor stipulates to deliver 
possession of the premises at a future 
day, in as good repair as they were at 
the time of the execution of the con- 
tract, "natural and reasonable wear and 
tear excepted," the exception covers, 
only such decay or depreciation in 
value of the property as may arise 
from ordinary and reasonable use. An 
injury to the property by a freshet is 
not within .the exception. Green v. 
Kelly, 20 N. J. L. i;44. 

1. Abbott's L. Diet. 

2 Semble. — That the words "natural 
persons," in a statute, indicated a legis- 
lative intent not to include moneyed 
institutions or other than municipal 
corporations. Wagenhurst v. Delaware 
Township, 4 Pa. Co. Ct. Rep. 533. 

Natural Law. — A rule which so neces- 
sarily agrees with the nature and state 
of man that, without observing its max- 
ims, the peace and happiness of society 
can never be preserved. Borden v. 
State, II Ark. 527. 

"Natural rights of property" must 
be rights which attach to property in 
its primitive state, and cannot, witfiout 
contradiction in terms, be applied to an 
artificial subject matter like a house. 
Angus V. Dalton, 4 Q^B. D. 161. 

" Nature, substance and quality of 
the article demanded," § 6, Sale of 
Food and Drugs act, 1875, 3^ & 39 V. 
C. 63, means the nature or quality ac- 
cording as the article is ordinarily un- 



220 



Property in Natural Gas. NA TURA L GA S. Property in Natural Gas. 



carbonaceous deposits, such as coal and petroleum ; and similar 
accumulations not unfrequently occur in connection with deposits 
of rock salt. The gases from any of these sources, escaping by 
means of fissures or seams to the open air, may be collected and 
burned in suitable arrangements, and are commonly called 
"natural gas."^ Though gas is a mineral, it is subject to the 
decisions governing ordinary minerals, with many qualifications; 
and is governed by rules analogous to those governing water per- 
colating beneath the surface. Water, oil, and still more strongly, 
gas may be classed by themselves, and have been not inaptly 
termed minerals ferce naiura.^ 

II. PsoPEBTY IN Natural (Jas.— Natural gas is not subject to 
absolute ownership ; it belongs to the owner of the land, and 
forms a part of it, so long as it is on the land, and subject to his 
control, but when it escapes and goes into other land, or comes 
under the control of another, his title is lost. Possession of th^ 
land is not necessarily possession of the gas. If an adjoining 
owner drills a well and taps your gas, so that it comes under his 
control, it is no longer yours, byt his. From the nature of gas 
and gas operations, the grant of well rights is necessarily exclusive.^ 



sea or lake and another. The Young 
American, Newb. Adm. io6. See also 
Surface Waters. 

1. "Gas and gas lighting." Encjclo- 
piEdia Britannica. 

2. See Am. & Eng. Encyc. of Law; 
Westmoreland etc. Nat. Gas Co. v. 
De Witt, 130 Pa. St. 235; Wood Co. 
Petroleum Co. v. West Virginia Transp. 
Co., 28 W. Va. 2io; a. c, 57 Am. Rep. 

659- 

By a conveyance of "mines and min- 
erals" the grant does not embrace 
everything in the • mineral kingdom, 
as distinguished from what belongs to 
the animal and vegetable; nor is such 
a grant confined to any one of the sub- 
ordinate divisions into which the min- 
eral kingdom is subdivided by chemists. 
Hartwell v. Camman, 10 N.J. Eq. 128. 

As to whether natural gas is in- 
cluded in the words "other valuable 
volatile substance" when used in a 
lease in connection with the words 
petroleum, rock, or carbon oil, the 
court should order the issue tried by 
jury, as the words have no well-defined 
meaning and are ambiguous. Ford v. 
Buchanan, iii Pa. St. 31. 

Distinguished from OH. — "Oil" is not 
synonymous with gas when used in a 
lease; accordingly the production of 
gas alone will not satisfy the conditions 
of the lease. Truby v. Palmer (Pa. 
1886), 6 Atl. Rep. 74. 

Distinguished from Heat. — Natural 
gas is not heat. Nor can a company, 



incorporated under a statute providing 
for the creation of companies for sup- 
plying heat, furnish natural gas. Em- 
erson t>. Com., 108 Pa. St. 126. 

A Commercial Commodity. — "Natural 
gas is as much an article of commerce 
as iron ore, coal, petroleum, or any 
other of the like products of the earth. 
It is a commodity which may be trans- 
ported, and it is an article which may 
be bought and sold in the markets of 
the country." And, therefore, a stat- 
ute forbidding the transportation of the 
gas from the State is void, as it is in 
conflict with the constitution of the 
United States, which provides that 
the regulation of interstate commerce 
shall be with congress. State z'. In- 
diana etc. Oil, Gas & Min. Co., 120 
Ind. 579; Carothers v. Philadelphia 
Co., 118 Pa. St. 468. 

Less common than wood or oil, it is 
nevertheless, a fuel. Citizens' Gas etc. 
Min. Co. V. Elwood, 114 Ind. 33S. See 
also Emerson v. Com., loS Pa. St. 126. 

3. Westmoreland etc. Nat. Gas Co. 
V. Dewitt, 130 Pa. St. 235; Wood Co. 
Petroleum Co. t>. West Virginia Transp. 
Co., 28 W. Va. 210; s. c, 57 Am. Rep. 

659- 

A landlord leased premises for the 
express and sole purpose of mining and 
taking carbon oil therefrom at a fixed 
royalty. The tenant opened a well 
which produced both oil and hydro- 
carbon gas, the latter in large quanti- 
ties, issuing by its own force from the 



221 



Definition. 



NA TURAL GAS COMPANIES. 



Definition. 



NATURAL GAS COMPANIES— (See Gas Companies, vol. $, p. 
1268). — A natural gas company, being for a public use, may re- 
ceive the right of eminent domain from the legislature.-* 



■well. The tenant separated the gas 
from the oil, and by pipes conducted it 
beyond the leased premises, where he 
sold or appropriated it to his own use. 
Held, that the tenant was not account- 
able to the landlord for the gas or its 
value. The court said: "By analogy it 
seems to me the rule and principles, 
which pertain to air and water and 
other subjects of the same nature, must 
be applied to the natural or hydro- 
carbon gas involved in this suit. Nei- 
ther the developments of science nor 
the evidence in this cause establish that 
such gas is likely to be exhausted by its 
iJse and consumption. That such may 
ultimately be the case is possible, but 
the fact, if it is such, is not sufficiently 
certain or apparent to be the basis of a 
judicial decision. The appellant there- 
fore could not certainlj' be guilty of 
either legal or equitable waste in the 
use of said gas. . . . If no oil was 
or ever had been obtained from the 
well the case might be different. . . . 
If the gas did not escape from the well 
of its own force, it is possible the les- 
see would not, against the consent of 
the lessors, be permitted to pump it 
from the well. But in this case, as it is 
essential that the well shall be kept 
open in order that the oil may be 
pumped from it, and as the gas issues 
of its own accord from the well so 
necessarily and rightfully kept open, it 
is clear that the lessee, in the absence 
of any stipulation for compensation, 
has the right to use and appropriate the 
gas in any proper manner he may 
choose without accounting therefor to 
the lessors." Wood Co. Petroleum Co. 
V. West Virginia Transp. Co., 28 W. 
Va, 210; s. c, 57 Am. Rep. 659. 

A gas company which lias leased 
and is using natural gas wells is en- 
titled to an injunction against the lessor 
restraining him from interfering, since 
such interference is likely to result in 
irreparable injury. Citizens' Nat. Gas 
Co. V. Shenango Nat. Gas. Co., (Pa. 
iSgo), 20 Atl. Rep. 947. 

Drilling Gas Wells. — One undertaking 
to drill a gas well to a certain depth 
and of a certain size must comply lit- 
erally with the contract, even though 
no gas be found and a well of a smaller 
bore is just as effective in determining 
that no gas can be found there at that 



depth. 30 Cent. Law J. 503; Gillespie 
Tool Co. V. Wilson, 123 Pa. St. 19. 

In the Jefferson common pleas court 
it was sought by the owners of a coal 
mine to enjoin the owner of the sur- 
face from boring a gas well through 
their strata of coal, on the ground that 
it was a trespass attended with great 
danger to the lives of the miners and 
property of the mine, owing to the fact 
that the gas could not be controlled. 
This was in 1885. The court at first 
denied an injunction, upon the ground 
that the act of the defendant would be 
a mere trespass, for which an adequate 
remedy was afforded in an action at 
law. But on the succeeding day the 
court, at the trial, reversed its former 
ruling, placing it chiefly upon the prob- 
able danger of driving a gas well through 
a mine, although it was the court's 
opinion that it would be some daj' pos- 
sible to dig such a well in such a place. 
The court also held that the surface 
owner had no right of way of necessity 
through the vein of coal to his land be- 
neath it, a reservation of such a wa^' 
not having been made. 30 Cent. Law 
J. 503; Jefferson Ii-on Works v. Gill 
Bris., 14 W. L. Bull. 2. 

1. Bloomfield etc. Nat. Gas Light 
Co. V. Richardson, 63 Barb. (N. Y.) 
437; State v. Indiana etc. Gas, Oil & 
Min. Co., 120 Ind. 581; Pittsburgh's 
Appeal, n.i; Pa. St. 4; Johnston v. 
Peoples' Nat. Gas Co., 5 Cent. R. 564. 

Corporations having the power to 
deal in natural gas organized before 
the passage of the Pennsylvania Nat- 
ural Gas act of 1885, received by that 
act the power to condemn rights of way 
for their pipe lines, whether they had 
such power before or not, luider that 
provision of the act which confers the 
right and prescribes the proceedings of 
eminent domain as to all corporations 
then engaged or thereafter to be en- 
gaged in the business. Carothers v. 
Philadelphia Co., 118 Pa. St. 468. 

As to compensating the holder of the 
fee for laying gas mains under a high- 
way, see Bloomfield etc. Nat. Gas 
Light Co. V. Richardson, 63 Barb. 
(N. Y.) 437; Bloomfield etc. Nat. Gas 
Light Co. V. Calkins, 62 N. Y. 386; 
Sterling's Appeal, iii Pa. St. 35; Mc- 
Devitt's Appeal (Pa.), 7 Atl. Rep. 588. 

FenuBylvania Natural Gas Act of 1886. 



222 



NATURAL HEIRS— NATURALIZATION. 

NATUEAI HEIRS— (See also ISSUE, 1 1 Am. & Eng. Encyc. of 
Law 869). — The words "natural heirs" and "heirs of the body" 
in a will, and by way of executory devise, are considered as of the 
same legal import.^ 

NATURALIZATION— (See also CITIZENSHIP, vol. 3. p. 242; 
Alien, vol. i, p. 456). 



I Definition, 224. 
II. In Whom the Power Is Vested, 

224. 

1. United States, 224. 
2 States, 224. 

111. Who May be Naturalized, 225. 
1 In General, 225. 

2. Privileged Classes, 225. 

— A corporation whose charter enables 
it to engage in "a.ny work or works, 
public or private, which may tend, or 
be designed to improve, increase, facili- 
tate or develop" trade, can engage in 
the business of producing and supply- 
ing natural gas under the Pennsylvania 
Natural Gas act of 1S85, whose pre- 
amble declares that natural gas has be- 
come a "prime necessity for use as a 
iuel, and otherwise in the development of 
trade." Carothers v. Philadelphia Co., 
J iS Pa. St. 468. 

Where a natural gas company had 
been incorporated under a law that did 
not authorize the incorporation of such 
a companj', and under it had begun to 
supply natural gas within a city, and 
had laid pipes therein — having supplied 
one mill within the city, it was held to 
be within the provisions of an act sub- 
sequently enacted, authorizing the in- 
corporation of such a company, and 
providing that such a company could 
accept the provisions of such subse- 
quent act, and organize thereunder, and 
that the provision of the act should not 
apply to a corporation accepting it, 
which "had to some extent prior to the 
passage" "begun supplying natural gas 
within such city borough, or had laid 
pipes for such purpose therein." But a 
city cannot sustain a bill for perpetual 
injunction against a natural gas fuel 
company, organized under such act, on 
the groujid that the corporation has 
laid its pipes in the streets without per- 
mission, and that such pipes are defect- 
ive and cause injury to the persons and 
property and citizens, where the aver- 
ments of the bill are denied, and the 
court upon examination finds the mat- 
ter complained of is not a public nui- 
sance. 30 Cent. Law J. 501; Appeal 



(a) Minors, 22^1. 

{_b) Wines of Citizens, Native 
or Naturalized, 227. 

(c) Wtdovj and Children of 
One Who Has Made 
Preliminary Declaration 
but Dies Before His 
Admission, 227. 

of Borough of Butler (Pa.), 6 Atl. Rep. 
708. See also Allegheny v. Char- 
tier's Valley Gas Co., 10 Cent. Rep. 
281. 

The powers of the councils of cities 
and boroughs to legislate in regard to 
natural gas companies are onlj' such as 
are delegated to them by tlie act of 
May 29th, 1885, P. L. 29. They are 
autiiorized to give or withhold their as- 
sent without more. They have no power 
to couple their assent with any condi- 
tion or restriction not imposed by said 
act, unless the company agrees to ac- 
cept the same, and be bound thereby; 
and even the conditions or restrictions 
so accepted by the company must har- 
monize and in no wise conflict with the 
provisions of said act. The assent of 
councils being given, the regulations 
they are authorized to adopt are such 
only as relate to the manner of laying 
pipes, altering, inspecting and repairing 
the sewers, and the character thereof 
with respect to safety and public con- 
venience. These regulations must also 
be reasonable and not in conflict with 
any of the provisions of the act. In 
all other respects the power of such 
companies are clearlj-- defined and their 
duties and liabilities prescribed by the 
act under which they are incorporated. 
Pittsburgh's Appeal, 115 Pa. St. 4. 

1. Smith V. Pendell, 19 Conn. 107. 

The words "natural heirs" in a legacy 
were held to mean children, issue, in 
distinction from collateral heirs, in 
Miller v. Churchill, 78 N.Car. 372. 

The words "natural heirs" in a will 
have been held to be synonymous with 
"heirs." Re Sinzheimer, 5 Den. (N. 
Y.) 321. And see Miller w. Churchill, 
78 N. Car. 372; Ludlum v. Otis, 15 
Hun (N. Y.) 410. 



223 



Synopsis, 



NA TURALIZA TION. 



Definition. 



(,d) Aliens in Military Ser 
vice oj United States 
228. 

(e) Seamen, 228. 
IV. Procedure, 229. 

1. Pj-elimmary Declaration oJ 

Intention^ 22g. 

2. Application to be Admitted to 



Citizenship, 230. 
{a} Before What Courts, 230. 
(5) Declaration and Renun- 
ciations, 230. 
(c) Proof, 230. 

id) Judgment and Effect 
Thereof, 231. 
V. Certificate and Record, 232. 



1. Definition. — Naturalization is the act by which an alien is 
made a citizen of the United States of America. It is the act 
of adopting a foreigner and clothing him with all the privileges 
of a native born citizen.* 

II. In Whom the Power Is Vested— 1. United States— The 
power of naturalization is vested exclusively in congress and can- 
not be exercised by any of the States.* 

2. States. — The States, however, may confer such of the privi- 
leges of their own citizens upon aliens, with regard to the owner- 
ship of land or the participation in the State government, as each 
may think fit within its own limits, and, in short, as to the State 
government, can place them on an equal footing with a citizen, 
but cannot make them citizens of the United States.^ 



1. I Bouv. L. Diet.; Osborn v. Bank 
of United States, 9 Wheat. (U.S.) 827; 
9 Op. Att. jGen. 359. 

A nation, or the sovereign who rep- 
resents it, mav grant to a stranger the 
quality of a citizen by admitting him 
into the body of the political society. 
This is called naturalization. Vattel Law 
of Nat., bk. I, ch. ig, §§ 212-214. See 
also Morse on Citizenship 66, and Re 
Wehlitz, 16 Wis. 443; s. c, 84 Am. 
Dec. 700. 

2. I Minor's Inst. 139; United States 
V. Vellato, 2 Dall. (U. S.) 373; Hous- 
ton V. Moore, 5 Wheat. (U. S.) i, 48; 
Thurlow V. Massachusetts, 5 How. 504; 
Smith V. Turner, 7 How. (U. S.) 283; 
I Kent, § 424. 

The power of naturalization is ex- 
clusively in congress, but the treaty of 
amity and commerce between the 
United States and France of 1778, art. 
II, enabled the' subjects of France to 
purchase and hold lands in the United 
States. Chirac v. Chirac, 2 Wheat. (U. 
S.) 259. See also Citizenship, 3 Am. 
& Eng. Encvc. of Law 246, note i. 
Contra, Collet v. Collet, 2 Dall. (U. S.) 
294, which case, however, was subse- 
quently overruled by the cases above 
cited, and was said by Chancellor 
Kent to have been "hastily and in- 
consideratelj' declared." i Kent, § 224. 

3. I Minor's Inst. 139; Barzizas v. 
Hopkins, 2 Rand. (Va.) 276; Dred 



Scott z". Sandford, 19 How. (U. S.)393. 
Each State being sovereign, except as 
to matters referred to the general gov- 
ernment, may, as the result of that 
sovereignty', confer the rights of citizen- 
ship on whomsoever it pleases, so far as 
to make him a citizen of that State, 
though he will not thereby become a 
citizen of the United States. Re Weh- 
litz, 16 Wis. 443; s. c, 84 Am. Dec 700. 
"No less than twelve of the States 
also permit aliens, after a short resi- 
dence therein, and after declaring their 
intention to become citizens, to exercise 
the elective franchise. When an alien 
is thus given the privilege permanently 
to reside within a State, and to hold 
property of all kinds therein, and to ex- 
ercise the privilege of suflVage, the dis- 
tinction in right and privilege and im- 
munity between him and a citizen is 
not very plain. Indeed, as the suffrage 
would seem peculiarly to belong to citi- 
zens, and as the voter for representa- 
tives in the State legislature may vote 
for representatives in congress also, it 
would seem that there might be some 
question whether a State could confer 
upon an alien this high privilege. It is 
a question, however, which has never 
been made. One privilege, at least, the 
State could not confer upon an alien. 
Without the power of naturalization 
she could not give him as a citizen a 
title to those privileges and immunities. 



224 



Who May be. 



NA TURALIZA TION. 



In General. 



III. Who May be Naturalized — 1. In General. — Any alien 
friend,-' who is a free white person, or a person of African nativity 
or descent,^ who has made the preliminary declaration prescribed 
by law,^ who has resided for the five years next preceding his 
application in the United States,* and for one year next preced- 
ing such application in the State or Territory in which the court 
sits to whom he makes application, and who, during that time, 
has been of good moral character, attached to the principles of the 
constitution of the United States and well disposed to the good 
order of the same, may become a citizen of the United States,^ in 
the manner to be described, and no other.^ A married woman 
may be naturalized without the concurrence of her husband.' 

2. Privileged Classes — (a) Minors. — The children of naturalized 
citizens of the United States, being under the age of twenty-one 
at the time of their parents naturalization, shall, if dwelling in 
this country, be deemed citizens thereof.^ Any alien who has re- 



of citizens of the several States which 
the federal constitution guaranties and 
secures." Cooley on Prin. of Con. L. 
77. See also Elections, 6 Am. & 
Eng. Encyc. of Law 267. 

1. No alien who is a native citizen or 
subject, or a denizen of any country, 
state or sovereignty with which the 
United States are at war at the time of 
his application, shall be then admitted 
to become a citizen of the United States. 
Rev. Stat. U. S., § 2171. See also The 
Frances, 8 Cranch (U. S.) 335; Ex 
jrarte Newman, 2 Gall. (U. S.) 11. 

2. Rev. Stat, § 2169. The natural- 
ization laws apply only to foreigners, 
subjects of another allegiance. They 
do not include Indians. 7 Atty. Gen. Op. 
746: See also Citizenship, 3 Am. & 
Eng. Encyc. of Law 245. "White per- 
sons" here does not include persons of 
the Mongolian race. Re Ah Yup, 5 
Sawyer (U. S.) 155. Or those of half 
white and half Indian blood. Re Ca- 
mille, 6 Sawyer (U. S.) 541; 6 Fed. 
Rep. 256; 2 Kent Com. 72; Lynch -y. 
Clarke, i Sandf Ch. (N. Y.) 583; 9 
Atty. Gen. Op. 373; 7 id. 746; Elk v. 
Wilkins, 112 U. S. 94. 

Rev. Stat. U. 8. 1878, § 2169, which 
allows only persons of the white or 
African races to become citizens, is not 
modified by 22 St. at Large, p. 61, ^ 14, 
providing that no court shall naturalize 
Chinese, and repealing all laws in con- 
flict therewith, as the latter act was only 
intended to remove doubts as to the 
eligibility of Chinese to citizenship, and 
hence a native of the Hawaiian islands 
cannot be naturalized, as he belongs to 
neither of the races mentioned. In re 



Kanaka Nian (Utah), 21 Pac. Rep. 

993- 

3. Rev. Stat. U. S., § 2165. See also 
Preliminary Declaration IV, i. 
An alien who emigrated to the United 
States after June i8th, 1812, and who 
was not a minor on his arrival, was held 
not entitled to take the oath of natural- 
ization on five years' residence, without 
having made the declaration of his in- 
tention to become a citizen, required by 
act of May 26th, 1S24, two years before 
his application to take the oath of na- 
turalization. Ex farte Brownlee, 9 
Ark. 191. Compare Ex parte Paul, 7- 
Hill (N. Y.)56. 

4. Rev. Stat. U. S., ^ 2170; Spratt v. 
Spratt, 4 Pet. (U. S.) 393; Ex parte 
Walton, I Cranch (U. S.) 186; Ex 
parte Saunderson, i Cranch. (U. S.) 
219; Ex parte Pasqualt, i Cranch (U. 
S.) 243; Anonymous, Pet. (C. C.) 457; 
Matter of Hawley, i Daly (N. Y.) 351. 

5. Rev. Stat. U. S., § 2165. 

6. Rev. Stat. U. S., \ 2165; Priest v. 
Cummings, 16 Wend. (N. Y.) 617; 
Shanks v. Dupont, 3 Pet. (U. S.) 248. 

7. I Minor's Inst. 139. The act of 
congress of 1802, ch. 28, does not ex- 
clude females from the rights of citizen- 
ship by naturalization. Brown v. Shill- 
ing, 9. Md. 7. 

8. Rev. Stat. U. S., § 2172; State v.. 
Penney, 10 Ark. 621; Campbell t>. Gor- 
don, 6 Cranch (U. S.) 177. 

Minor children of foreign parents,, 
whose mother, after the death of the 
father, marries a citizen, become citi- 
zens. Kreitz V. Behrensmeyer, 125 111.. 

741- 

A was born abroad and came to the 



16C. of L.— 15 



225 



Who May be. 



NA TURALIZA TION. 



Frivileged Classes. 



sided in the United States for five years, of which three were the 
years next preceding his arriving at the age of twenty-one, and 
who has continued to reside therein up to the time of his apph- 
cation for admission as a citizen, may become a citizen without 
having made the prehminary declaration of intention^ required in 
the first condition of § 2168 of U.S. Rev. Stat., provided, that he 
shall make the declaration required therein at the time of his ad- 
mission, and furnish proof and declare on oath that for two years 
it has been his intention to become a citizen of the United States, 
and in all other respects comply with the laws in regard to natu- 
ralization.^ 



United States when an infant with his 
alien parents. His father died when he 
was eight. His mother married an 
alien resident, who was naturalized 
when A (then sixteen) and his mother 
were living with him. Held, that as, 
under U. S. Rev. Stat., § 1994-, this made 
A's mother a citizen, it made A one 
under section 2172, which declares that 
children under age of persons natural- 
ized shall be deemed citizens. People v. 
Newell, 38 Hun (N. Y.) 78. 

The Naturalization act, in providing 
that the children of persons naturalized 
shall be citizens, operates prospectively, 
and makes citizens of those who, residing 
within the United States at the time 
of the naturalization of their parents, 
were born of alien parents in a foreign 
country. State t;. Andriano, 92 Mo. 70; 
O'Connor v. State, 9 Fla. 215; West v. 
West, 8 Paige (N. Y.) 433; United 
States V. Kellar, 13 Fed. Rep. 82; People 
V. Newell, i How. Pr., N. S. (N. Y.) 8; 
United States v. Hirshfield, 13 Blatchf. 
(U. S.) 330; 15 Attj. Gen. Op. 114. 

EvldencQ. — Where a person asking to 
be registered claims to be a citizen by 
virtue of the naturalization of his par- 
ents, the best evidence of the naturaliza- 
tion of the parent would be the original 
certificate of naturalization, or a dupli- 
cate thereof, when it can be obtained. 
But a party may, in the matter of prov- 
ing his citizenship, resort to secondary 
evidence when preliminary evidence 
cannot be obtained. People v. McNally, 
59 How. (N. Y.) Pr. 500. 

Children born in foreign countries of 
parents who were then aliens, but who 
subsequently emigrated to this country, 
and became naturalized during the time 
such children were minors, are citizens 
of this country. 10 Atty. Gen. Op. 329. 
But a child born out of the country after 
his father has renounced his allegiance to 
the United States, is not a citizen noren- 



titled to registration as a voter. Browne 
V. Dexter, 66 Cal. 39; In re Look Tin 
Sing, 10 Sawyer (U. S.; 353; Gould & 
Tucker Notes on Rev. Stat., § 2772. 

Children of citizens of the United 
States, who are born abroad, are United 
States citizens, of the United States. 
Wolff V. Archibald, 14 Fed. Rep. 369; 
15 Atty. Gen. Op. 114; 10 Atty. Gen. 
Op. 328; People V. Newell, 38 Hun 78. 
See also Citizenship, 3 Am. Eng. & 
Encyc. of Law 244. 

1. See post, IV, I. 

2. Rev. Stat. U. S., § 2167. 

An alien, who has resided in the 
United States five j-ears, of which three 
were the last years of his minority, is 
entitled to be admitted to citizenship 
under Rev. Stat. U. S., § 2167, which 
relates to the admission of aliens who 
have resided in the United States during 
the last three years of their minority, 
without having made the preliminary 
declaration of intention required in 
section 2165. Schutz's Petition, 64 N. 
H. 241. 

A minor who has neither declared 
his intention to become a citizen as re- 
quired b^' the statute, nor proved a resi- 
dence of five years, is not entitled to 
be admitted to citizenship. Ex ^arte 
Merry, 14 Phila. (Pa.) 212. 

It is not necessary that two of the 
five years' residence here required in 
the case of a minor alien should occur 
after the applicant has attained his ma- 
jority. Schultz's Petition, 64 N. H. 241; 
Ex parte Merry, 14 Phila. (Pa.) 212; 
Ex parte Randall, 14 Phila. (Pa.) 224. 

U. S. Rev. Stat., § 2167, relating to 
naturalization, provides that an alien, 
applying for citizenship under said sec- 
tion, may "be admitted a citizen of the 
United States without having made the 
declaration (of intention) required in 
the first condition of section 2165; but 
such alien shall make the declaration 



226 



Who May be. 



NA TURALIZA TION, 



Privileged Classes. 



(b) ]Vriics of citizens, native or naturalized, if capable of natural- 
ization, are to be deemed citizens.* 

(f) Widoiv and Children of One Who Has Made the Prelimi- 
nary Declarations, but Dies Before His Admission. — When an 
alien, who has made the preliminary declaration recjuired in § 2165 
Rev. Stat., dies before his admission as a citizen, his widow and 
children, upon taking the oaths prescribed by law, shall be deemed 
citizens.^ 



required therein at the time of his ad- 
mission.'' Held, that the declaration 
last m.entioned relates, not to the decla- 
ration of intention required in the first 
condition of section 2165, but to the 
declaration of allegiance required, in 
the second condition of said section, to 
be made "at the time of his application 
to be admitted."' State v. Macdonald, 
24 Minn. 48. And the declaration must 
be under oath. United States ». Walsh, 
22 Fed. Rep. 644. 

1. Rev. Stat. U. S., § 1994. 

Under U. S. Rev. Stat., § 1994, an 
alien woman of the race or class of per- 
sons that are entitled to be naturalized 
under existing laws, who is married to 
a citizen of the United States, becomes 
by that act a citizen thereof; and such 
admission to citizenship has the same 
force and effect as if such woman had 
been naturalized by the judgment of a 
competent court. Leonard v. Grant, 6 
Sawyer (U. S.) 603. See also Citizen- 
ship, 3 Am. & Eng. Encyc. of Law 243. 

Nonresident Wife of" Citizen. — The 
clause in said statute, "might herself be 
lawfully naturalized," does not require 
that the woman shall have the qualifi- 
cations of residence, good character, 
etc., as in case of admission to citizen- 
ship in a judicial proceeding, but it is 
Sufficient if she is of the class or race 
of persons who may be naturalized un- 
der existing laws. Leonard v. Grant, 
6 Sawyer (U. S.) 603. 

Under the naturalization laws, a 
woman who is an alien acquires citizen- 
ship whenever her husband becomes a 
citizen. It makes no difference that 
she is not twenty-one years of age. 
The common and statute law of New 
York, as to the ability of aliens to take 
lands by descent — considered. Renner 
V. Muller, 44 N. Y. Super. Ct. 535. 

An alien woman, whose husband be- 
comes a naturalized citizen of the 
United States, is, under section 2 of the 
act of congress of 1S55, thereby made 
a citizen, though she may live at a dis- 
tance from her husband for years, and 



never come to the United States until 
after his death. Headman v. Rose, 63 
Ga. 458. See also Burton v- Burton, i 
Keyes (N. Y.) 359; Kane v. McCarthy, 
63 N. Car. 299; Luhrs v. Eimer, i5 Fed. 
Rep. 215; 14 Atty. Gen.Op.402. Contra, 
in I Minn. Ins. 141, the learned author 
seems to incline to the contrary opinion, 
viz., that the wife must be a resident of 
the United States in the lifetime of her 
husband, citing Kelly t;. Owen, 7 Wall. 
(U. S.) 49S, and Burton v. Burton, 26 
I-Iow. Pr. (N. Y.) 474. 

But the former case is cited on both 
sides of the controversy, and the point 
does not seem to have been well consid- 
ered, while the latter was overruled in 
Burton v. Burton, i Keyes (N. Y.) 350. 

2. Rev. Stat. U. S., § 2168. 

When a foreign subject, after residing 
here the proper time, declares his in- 
tention to become a citizen, but dies 
befoijp he has been here long enough to 
receive his certificate of citizenship, his 
children, born abroad, who came here 
under 17 years of age with him, take 
an estate of inheritance in his lands, 
and, on attaining 21 years of age, be- 
come citizens of the United States and 
of the State of Texas. Schrimpf v. 
Settegast, 38 Tex. 96. 

The proviso in the act of April I4fh, 
1802, which excludes from citizenship 
aliens whose country should be, at^ the 
time of the application, at war with the 
United States, was held to extend to the 
supplementary act of March, 1804, au- 
thorizing the naturalization of the 
widow and children of persons, who, 
having pursued the directions o^ the 
original act, might die before the}' 
became naturalized. Therefore the 
minor son of an alien, who had made 
report of himself conformably to the 
act, but who had died two years there- 
after, was held not to be admissible to 
the rights of citizenship, the country 
from which he emigrated being, at the 
time of the application of the son, at 
war with the United States. Ex parte 
Overington, 5 Binn. (Pa.) 371. See also 



227 



Who May be. NATURALIZATION. Privileged Classes. 

((f) Aliens in the Military Service of the United States. — Any 
alien of the age of twenty-one years or more, who has been hon- 
orably discharged from the military service of the United States, 
may be admitted to become a citizen without the 'preliminary 
declaration of intention ; and shall only be required to prove one 
year's residence previous to his application ; " and the court ad- 
mitting such alien shall, in addition to such proof of residence 
and good moral character as now provided by law, be satisfied 
by competent proof of such person's having been honorably dis- 
charged from the service of the United States."^ 

{e) Seamen. — Every seaman, being a foreigner, who declares his 
intention of becoming a citizen of the United States in any com- 
petent court, and shall have served three years on board of a 
merchant vessel of the United States subsequent to the date of 
such declaration, may, on his application to any competent court, 
and the production of his certificate of discharge and good con- 
duct during that time, together with the certificate of his declara- 
tion of intention to become a citizen, be admitted a citizen of the 
United States ; and every seaman, being a foreigner, shall, after 
his declaration of intention to become a citizen of. the United 
States, and after he shall have served such three years, be deemed 
a citizen of the United States for the purpose of manning and 
serving on board any merchant vessel of the United States, any- 
thing to the contrary in any act of congress notwithstanding ; but 
such seaman shall, for all purposes of protection as an American 
citizen, be deemed such, after the filing of his declaration of in- 
tention to become such citizen. * 

* 

Elections, 6 Am. & Eng. Encyc. of now provided by law, be satisfied by 

Law 267. competent proof of such person's having 

1. Rev. Stat. U. S., § 2166. been honorably discharged from the 

This has been held to include the service of the United States," it might 

navy as well as the army. /?e'Stewart, well be thought that no qualification as 

7 Robt. (N. Y.) 635. But see In re to race is required under this section. 

Bailey, 2 Sawyer (U. S.) 200, where it Such is the conclusion of Dr. Minor, 

was held not to apply to marines. In re who states very emphatically (i Min. 

Bye, 2 Daly (N. Y.) 525. . Inst. 141) that the discharged soldier or 

Satisfactory proof bv a person apply- sailor may be admitted to citizenship 
ing to be naturalized that he is of good without qualification as to race, 
moral character, that he has resided 2. Rev. Stat. U. S., § 2174. 
one year within the United States pre- Stat. June 9th, 1874, ^h. 200 (18 St. 
vious to the application, that he is of 64) provides that none of the provisions 
the age of twenty-one years and up- of the cited act of 1872, "shall apply to 
wards, that he was regularly enlisted in sail or steam vessels engaged in the 
the United States navy, where he served coastwise trade, except the coastwise 
as an enlisted man, and that he was trade between the Atlantic and Pacific 
honorably discharged from service, en- coasts, or in the lake- going trade touch- 
title him to naturalization under the ing at foreign ports or otherwise, or in 
provisions of section 2i of the act of the trade between the United States 
congress of July 17th, 1862. i?e Stewart, and the British North American pos- 
7 Robt. (N. Y.) 635. sessions, or in any case where the 

No Qualification as to Race Required, seamen are by custom or agreement en- 

— From the words, "the court admit- titled to participate in the 'profits or 

ting shall, in addition to such proof of result of a cruise, or voyage." 
residence and good moral character as U. S. Rev. Stat., § 2174, conferring 

228 



Procedure. 



NA TURA LIZA TION. PreUminary Peolaration. 



IV. PaocEDTTEE — 1. Preliminary Declaration of Intention. — The 

alien seeking admission to citizenship must declare upon oath, 
before a circuit or district court of the United States, or a district 
or supreme court of the Territories, or a court of record of any 
of the States having common law jurisdiction, and a seal and a 
clerk, at least two years prior to his admission to citizenship, that 
it is his bona fide intention to become a citizen, ^ and to renounce 
his allegiance to any prince, potentate, or state, and particularly 
by name to the prince or state whereof he is at the time a sub- 
ject or citizen.* 



upon seamen who have served on board 
merchant vessels of the United States 
the right to citizenship, upon applica- 
tion to the court, does not extend to the 
naval service. Kx parte Gormlj, 14 
Phila. (Pa.) 211. 

1. Rev. Stat. U. S., § 2167. See also 
Elections, 6 Am. & Eng. Encjc. of 
Law 267. 

The declaration of intention must be 
under oath. United States v. Walsh, 
22 Fed. Rep. 644. 

The intention must be declared -in 
such form as to show the time when it 
was actually' formed. Ex parte Ran- 
dall, 14 Phila. (Pa.) 224. 

The probate court of Shelby county, 
Tennessee, has no common law juris- 
diction, and cannot take this declara- 
tion. Ex parte Tweedy, 22 Fed. Rep. 
85. City, police and county courts in 
various States, when courts of record, 
and having a clerk, have been held en- 
titled to take it. United States ik Power, 
14 Blatchf. (U. S.) 223; Ex parte Glad- 
hill, 8 Mete. (Mass.) 168; Ex parte 
Cregg, 2 Curt. (U. S.) 98; State v. 
Whittemore, 50 N. H. 245; s. c, 9 Am. 
Rep. 196; In re Conner, 39 Cal. 98; 
s c, 2 Am. Rep. 427; Levy's Case, 14 
Atty. Gen. Op. 509; State v. Webster, 7 
Neb. 469; Morgan v. Dudley', 18 B. Mon. 
(Ky.) 693; People v. McGowan, 77 111. 
649; B.C., 20 Am. Rep. 254. State courts, 
in admitting aliens, act as United States 
courts. In re Christern, 43 N. Y. Super. 
Ct. 523; G. & T. Notes on Rev. Stat., 
•5 2167. 

Declaration Made Before a Clerk. — 
Under Rev. Stat. U. S., § 2165, relating 
to naturalization, which provides that 
an alien's declaration of intention to 
become a citizen may be made before 
the clerk of the courts therein named 
as well as before the court, it is not 
necessary that such declaration should 
be made in the office of the clerk. 
Andres v. Judge of Circuit Court, 77 
Mich. 85. 



The clerk of the United States circuit 
court has no authority to take from an 
alien a declaration of his intention to 
become a citizen of the United States 
at the private residence of the party, 
and for that purpose to carry the 
records of the court from the clerk's 
office to such residence. In re Lang- 
try, 31 Fed. Rep. 879. 

A court whose judge acts as its only 
clerk is not a court having a clerk with- 
in U. S. Rev. Stat. 469 — providing for 
naturalization of aliens — and is not 
competent to naturalize. 1878, State 
V. Webster, 7 Neb. 469. See also Elec- 
tions, 6 Am. & Eng. Encyc. of Law 
?.67. 

2. Rev. Stat. U. S., § 2167; Stat. 
February, 1876, ch. 5 (19 St. 2), pro- 
vides "that the declaration of intention 
to become a citizen of the United States, 
required by Rev. Stat., § 2165, may be 
made by an alien before the cleric of 
any of the courts named in section 2165; 
and all such declarations heretofore 
made before any such clerk are hereby 
declared as legal and valid as if they 
had been made before one of the clerks 
named iij said section." See also 13ut- 
terworth's Case, 1 Woodb. & M. 323. 

The declaration of an alien of his 
intention to become a citizen of the 
United States, stated that it was bona 
fide his intention to become a citizen ot 
the United States of America, and to 
renounce and abjure all allegiance and 
fidelity to every foreign prince, state, 
potentate and sovereignty whatever, 
and particularly to the Queen of Great 
Britain and Ireland, according to the 
several acts of congress in such cases 
made and provided. Held, that the 
declaration was not objectionable be- 
cause the name of the queen was not 
stated. Ex parte Smith, 8 Blackf. 
(Ind.) 395. 

Effect of the Declaration. — A mere 
"declaration of intention" by a for- 
eigner to become a citizen does not de- 



229 



Procedure. 



NA TURALIZA TION. 



Citizenship. 



The declaration must be recorded.' 

2. Application to be Admitted to CitizensMp — {a) Before What 
Courts. — Proceedings may be had for the admission of an alier. lo 
citizenship before any of the courts before which he might have 
made his preliminary declaration of intent ;* and the court, in ad- 
mitting the alien to citizenship, acts judicially.^ 

{J}) Declaration and Renunciations. — The alien shall declare, on 
oath, that he will support the constitution of the United States, 
that he renounces and abjures all allegiance and fidelity to every 
foreign prince, potentate, or state; particularly by name to the 
prince, potentate, or state of which he was before a citizen or 
subject ;* and, if he has borne any hereditary title or has been a 
member of any order of nobility, he shall make an express renun- 
ciation of such title or order, which proceedings must be re- 
corded.^ 

[c) Proof. — The alien must prove that he has made the prelimi- 
nary declaration required, which must be proved by the record, •• 
that he has resided within the United States five years at least, 
and within the State or Territory where the court sits for one 
year,'^ and that during that time he has behaved as a man of good 



prive a court of the United States of 
jurisdiction over a suit to wiiich he is a 
party, as a suit against a foreign citizen 
or subject. The final renunciation of 
his foreign allegiance is necessary. 
1854, Baird v. Byrne, 3 Wall. Jr. i. 

After a foreigner by birih has duly 
declared his intention to become a citi- 
zen, he must be regarded as having se- 
cured to himself and his children, who 
are minors, the right oi a naturalized 
citizen, except so far as pertains to 
the exercise of the elective franchise. 
Settegast v. Schrimpf, 35 Tex. 344. 

1. Rev. Stat., § 2165, cl. 4; State v. 
Barrett, 40 Minn. 65; /« re Christern, 
56 How. Pr. (N. Y.) 5. 

Where the record of the previous 
declaration made by the party omitted 
to state that it was made on oath, and 
that it included a renunciation of al- 
legiance to foreign princes, 'etc., such 
omission does not invalidate the subse- 
quent act of naturalization founded on 
such previous declaration. Towle's 
Case, 5 Leigh (Va.) 743. 

The original affidavit of a declara- 
tion of intention to become a citizen of 
the United States, or a copy, properly 
certified by the clerk or deputy clerk of 
a district court of Minnesota, attested 
by its seal, is competent evidence of the 
declaration of intention. State v. Bar- 
rett, 40 Minn. 61;. 

2. Rev. Stat.'U. S., § 2165. See also 
IV, 1. 



State courts in admitting aliens to 
citizenship under naturalization laws 
act as United States courts. Matter 
of Chrlstern, 43 N. Y. Super. Ct. 

sn- 

State courts have a competent and 
constitutional power to naturalize. 
Matter of Ramsden, 13 Hows Pr. 
(N. Y.) 429; People v. Sweetman, 3 
Park Cr. L. 358. 

3. I Min. Ins. 140; Spratt v. Spratt, 

4 Pet. (U. S.) 406; Rx parte Knowles, 

5 Cal. 302; In re Clark, 18 Barb. (N. 
Y.) 444; McCarthy v. Marsh, 5 N. Y. 
279; In re An Alien, 57 Hill (N. 
Y.) 138; In re Christern, 43 N. Y. 
Super. Ct. 523. 

4. Rev. Stat. U. S., § 2165, cl. 2. 

5. Rev. Stat. U. S., ^ 2165, cl. 4. 

The Oath. — The oath of naturaliza- 
tion, when taken, confers the rights of 
citizen, and it is not necessary that 
there should be an order of court ad- 
mitting him to become Vi citizen. Camp- 
bell V. Gordon, 6 Cranch (U. S.) 
176. 

Under this act, an alien must take the 
required oaths at the time of his admis- 
sion to citizenship. And it is not suffi- 
cient that he took the oaths at the time 
of his giving notice to become a citizen. 
Richards v. M'Daniel, 2 Nott & M. (S. 
Car.) 351. 

6. Rev. Stat. U. S., § 2165; i Min. 
Inst. 140. 

7. Rev. Stat. U. S., k 2165. 



230 



Procedure. 



NA TURALIZA TION. 



Citizenship. 



moral character, attached to the principles of the constitution of 
the United States, and well disposed to the good order and hap- 
piness of the same ; but the oath of the applicant shall in no case 
be allowed to prove his residence.^ 

{ji') The Judgment and the Effect Thereof. — The admission of 
an alien to citizenship by a court of competent jurisdiction has 
the effect and force of a judgment of such court. The court's 
action must be recorded as its judgment, and the record is con- 
clusive evidence of the facts which it recites.^ The naturaliza- 
tion of an alien confers upon him the privileges of a native 
citizen save only such as are withheld from him by the constitu- 
tion of the United States.* 



1. Rev. S'at. U. S., § 2165, cl. 3. 

Where an alien, during his residence 
in the United States, had been con- 
victed of perjury, it was held that he 
had not behaved as a man of good 
moral character, so as to entitle him to 
admission to citizenship, and that the 
fact that he had received a pardon did 
not alter the case. In re Spencer, 5 
Saw3'. (U. S.) 195. 

In proceedings instituted for natural- 
izing an alien, his residence cannot be 
established bj' affidavit, but must be 
proved in court by the testimony of 
witnesses. Nor are affidavits admissi- 
ble to establish the alien's good moral 
character, or his attachment to the 
principle of our government ; though 
on these points his own oath is admis- 
sible. But it seems that the oath of the 
alien should be corroborated b^' other 

evidence. In re , 7 Hill (.N. Y.) 

137- 

An alien cannot vouch for a person 
petitioning to be naturalized. State v. 
Papen, i Brewst. (Pa.) 263. 

The Revised Statutes of the United 
States, §2165, relating to the naturali- 
zation of aliens, which provide that it 
shall be made to appear to the satisfac- 
tion of the court admitting such alien 
that he has resided within the United 
States five years at least, and within the 
State or territory where such court is at 
the time held one year at least, but that 
the oath of the applicant shall be in no 
case allowed to prove his residence, 
forbid the taking of the oath of the ap- 
plicant himself as proof of his resi- 
dence, and do not merely render the 
oath of the applicant insufficient. S^ich 
an oath is extrajudicial, and perjury 
cannot be assigned thereon. United 
States V. Grottkau, 30 Fed. Rep. 672. 

2. 14 Atty. Gen. Op. 509; Spratt' v. 
Spratt, 4 Pet. (U. 8.) 406; Charles 
Green's Son v. Salas, 31 Fed. Rep. 



106; Stark V. Chesapeake Ins. Co., 7 
Cranch ^U. S.) 420. See also In re 
Coleman, 15 Blatchf. (U. S.) 420; i 
Min. Ins., 141; Towle's Case 5 Leigh. 
(Va.) 743; In re Christern, 43 N. Y. 
Super. Ct. 523. 

The validity and efficacy of a judg- 
ment admitting a person to citizenship 
are not impaired by an inaccurate 
statement in its recitals; they constitute, 
no part of the judgment. Accordingly, 
where the record of naturalization of 
an applicant for citizenship of the 
United States was perfect, but inac- 
curately recited that the applicant had' 
resided within the United States for 
three years preceding his arrival at the 
age of twenty-one years, no deception, 
being intended, the applicant being en- 
titled to be admitted on other ground^ 
and these facts appearing on an appli- 
cation for renaturalization — held, that 
there was no occasion for further pro- 
ceedings, and the application was de- 
nied. In re McCoppen, 5 Sawy. (U. 
S.) 630. See also V. 

The judgment of the tribunal or 
court, to whom the power to grant 
naturalization is confided by the su- 
preme power in the State, is conclusive 
as to law and fact everywhere and 
upon all the world. 18 Am. L. Reg., 
N. S. 674; In re Acorn, 2 Abb. (U. 
S.) 443; People V. McGowan, 77 111. 
644; s. c, 2B Am. Rep. 2154. See also 
pt. V. 

3. Osborn v. Bank of United States, 
9 Wheat. (U. S.) 738, 827; Const. U. S., 
art. I, § ii, 2, and iii, 3. 

Efiect of Naturalization on Alien's 
Suit Before Court of Claims. — Under 
ij 1068 of Rev. Stat, of United States, 
which provides that aliens who are citi- 
zens are subjects of any government 
which accords to the citizens of the 
United States the right to prosecute 
claims against such government, shall 



231 



Certificate and Record. NA TURALIZA TION. Certificate and Record. 



V. Certificate and Record.— The federal statute requires that 
a record should be kept of the naturalization proceedings.'- This 
record or a certificate thereof is the sole evidence admissible to 
prove the fact of an alien's naturalization.* It is not necessary that 



have the privilege of prosecuting claims 
against the United States in the court 
of claims. An alien v?ho was natural- 
ized before this section was enacted is 
entitled to prosecute an action begun 
before he was naturalized. Bulwinkle 
■V. United States, 4 Ct. of CI. 395; Mentz 
1'. United States, 4 Ct. of CI. — . And he 
m&y prosecute an action begun before 
this statute was enacted, if he was not 
an alien when the plea of alienage was 
put in. Wagner v. United States, 5 Ct. 
of CI. 637; Gould & Tucker's Notes on 
R. S. 1068. 

As to when naturalized citizen may 
Tote, see Elections, 6 Am. & Eng. 
Encyc. of Law 269. 

A rule to vacate a decree of naturali- 
zation will not be granted at the in- 
stance of a private citizen in the courts 
of Pennsylvania. State f. Papen, i 
Bt-ewst. (Pa.) 263. 

Retroactive Effect of Naturalization. — 
Naturalization, before office found, re- 
lates back, and confirms the title to 
land purchased during alienage. Jack- 
son V. Beach, i Johns. Cas. (N. Y.) 
399. Compare Jackson v. Green, 7 
Wend. (N.Y.)'67; Priest v. Cummings, 
20 Wend. (N. Y.) 338. But it does not 
retrospectively confirm a title claimed 
"by descent. Vaux v. Nesbit, i Mc- 
■Cord Ch. (S. Car.) 370. Naturalization 
<ioes not have such a retroactive opera- 
tion as to vest or confirm in the person 
naturalized an estate which, but for his 
teing an alien, would have descended to 
him in fee at the death of the person 
last seised. The New York statute of 
1843, providing that any naturalized 
citizen, to whom an estate would have 
descended if he had been a citizen at 
the death of the person last seised, 
might hold the same as though he had 
been a citizen at the time of the de- 
scent cast, applied only to persons al- 
ready naturalized at the time the act 
was passed, and had no reference to the 
future. Heney v. Brooklyn Benevolent 
Soc, 39 N. Y. 333; affirming 30 Barb. 
(N. Y.) 360. 

No court has any power or authority 
in naturalizing an alien to declare in its 
order that such alien shall be held to 
be a citizen from a time preceding the 
making of the order; and if it makes 
such declaration its act is unauthorized 



and void, so far as this declaration is 
concerned, and he is a citizen only 
from the time when such order was 
made. Dryden v. Swinburne, 20 W. 
Va. 89. 

1. Rev. Stat. U. S., § 2165; Charles 
Green's Sons v. Salas, 31 Fed. Rep. 
106. ' 

2. In the absence of evidence of 
naturalization by the court records, pa- 
rol evidence is inadmissible to prove 
the fact. Dryden v. Swinburne, 20 W. 
Va. 89; Matter of Desty, 8 Abb. N. C. 
(N. Y.) 250; People v. McNally, 59 
Mow. Pr. (N. Y.) 500; The Acorn, 2 
Abb. (U. S.) 435; In re Coleman, 15 
Blatchf (U. S.) 406; Slade v. Minor, 
2 Cranch (U. S.) 139. 

A certificate of naturalization in 
these words, namely: "I, A B, Clerk, 
etc., herebj' certify that at a superior 
court, held at Savannah, etc., before 
X Y, Judge, etc., on a certain day, C 
D, an alien, petitioned the court to be 
admitted a citizen, and having in all 
things complied with the law in such 
case, etc., the said C D was accordingly 
admitted a citizen of the United States, 
having first taken and subscribed in 
open court the oath of naturalization. 
Given under m.y hand and seal of the 
said court, etc." Held, to be insufficient 
to show that C D was naturalized. 
Miller v. Reinhart, 18 Ga. 239. 

A certificate of the clerk of the dis- 
trict court, reciting that the applicant 
has been duly admitted to citizenship, 
but failing to show any extract from 
the record, or minute of the action of 
the court, is not competent to show 
naturalization. Naturalization cannot 
be proved by parol. Charles Green's 
Son V. Salas, 31 Fed. Rep. 106. 

In the absence of proof that an alien 
has become a citizen of the United 
States, his original status is presumed 
to continue. Hauenstein v. Lynham, 
100 U. S. 4S3. See also Charles Green's 
Son V. Salas, 31 Fed. Rep. 106. 

But when records of naturalization 
are destroyed, secondary evidence of 
their contents is admissible, as of the 
contents of other records. Kreitz ».-■ 
Beyrensmeyer, 125 111. 141. 

The court cannot make up a record 
of naturalization proceedings and issue 
a certificate nunc pro tunc, when ho 
232 



Certificate and Record. NA TURALIZA TION. Certificate and Keoord. 



the record should shqw that 'all the legal prerequisites were com- 
plied with ; the judgment being conclusive of such compliance/ 
and the record cannot be attacked in a collateral proceeding, by 
showing that these prerequisites have not, in fact, been complied 
with.^ It has been held that the United States may sue in a 
federal court for the cancellation of a certificate of naturalization, 
obtained by fraud in a State court. But in such a suit the bill 
must show facts from which fraud may be inferred ; it is not suffi- 
cient to show that the decree is erroneous.^ 

NATURAL LAW. — That rule of conduct deducible from reason 
and conscience as distinguished from divine law on the one hand and 



record has been. made of the steps taken 
antecedent to the issuing of the certifi- 
cate. It cannot be supposed that things 
have been done in respect to the nat- 
uralization of persons which do not 
appear of record. Matter v. Desly, 8 
Abb. N. Cas. (N. Y.) 250. 

As to what has been held to consti- 
tute a sufficient record of naturalization, 
see In re Christern, 56 How. Pr. (N. Y.) 
e,\In re Coleman, 15 Blatchf. (U.S.) 406. 

1. Ritchie v. Putnam, 13 Wend. (N. 
Y.) 524; McDaniel v. Richards, i Mc- 
Cord L. (S. Car.) 187; In re Christ- 
ern, 56 How. Pr. (N. Y.) 5; People v. 
McGowan, 77 111. 646; Charles Green's 
Son V. Salas, 31 Fed. Rep. .106; United 
States V. Walsh, 22 Fed. Rep. 644; 
Stark V. Chesapeake Ins. Co., 7 Cr&ncli 
(U. S.) 420; Spratt V. Spratt, 4 Pet. 



ters are submitted to the decision of 
the court, and the presumption will be 
indulged the court heard evidence, 
was satisfied the applicant had com- 
plied with the law, 'and its findings 
must be held conclusive as to all facts 
recited in the record. Spratt v. Spratt, 
4 Pet. (U. S.) 393; People v. Pease, 30 
Barb. (N. Y.) 588; Campbell v. Gor- 
don, 6 Cranch (U. S.) 176; McCarthy 
V. Marsh, 5 N. Y. 263; People v. Mc- 
Gowan, 77 111. 646; s. c, 20 Am. Rep. 
254; State V. Macdonald, 24 Minn. 59; 
McCarthy v. Marsh, 5 N. Y. 263; 
Banks».Walker,3 Barb. (N.Y.)Ch. 438. 
It is a universal principle that, 
where power or jurisdiction is dele- 
gated to any public officer or tribunal 
over a subject matter, and its exercise 
is confided to his or their discretion. 



(U. S.) 393. Hence it is not necessary tte acts so done are binding and valid 



that it should appear in the certificate 
granted by the court that the person 
naturalized "had behaved as a man of 
good moral character," etc., as the 
granting of a certificate by a competent 
court raises the presumption that the 
court was satisfied as to the moral 
character of the alien. Campbell v. 
Gordon, 6 Cranch (U. S.) 176. 

A certificate of naturalization stated 
that the party "took the oath in such 
case required by the act of congress." 
Held, that this imported that he took 
the oath required in the very • words 
prescribed by the statute, and so the 
act of naturalization was good. Towles' 
Case, 5 Leigh (Va.) 743. 

2. It seems clear, both on principle 
and authority, a record of naturaliza- 
tion, made by a court of competent 
jurisdiction, cannot be impeached, in a 
collateral proceeding, by showing that 
the preliminary steps required by law 
have not, in fact, been taken. It is 
upon the principle such a record, like 
anj' other judgment of a court, affords 
complete evidence of its own validity'. 
In proceedings of naturalization mat- 



233 



as to the subject matter; and indi- 
vidual rights will not be disturbed col- 
laterally for anything done in the ex- 
ercise of that discretion within the 
authority and power conferred. The 
only questions which can arise between 
an individual claiming a right under 
the acts done and the public, or any 
person denying its validitj' are power 
in the officer and fraud in the party. 
All other questions are settled by the 
decision made or the act done b^' the 
tribunal or officer, whether executive 
(i Cr. 170-171), legislative (4 Wh. 423; 
2 Pet. 412; 4 Pet. 563), judicial (11 
Mass. 227; II S. & R. 429, adopted in 
2 Pet. 167, 168), or special (20 J. R. 739, 
740; 2 Dow. P. Cas. 521), etc., unless an 
appeal is provided for, or other revision, 
by some appellate or supervisory trib- 
unal, is prescribed by law." United 
States r;. Arredondo, 6 Pet. (U. S.) 729. 

3. United States v. Norsch, 42 Fed. 
Rep. 417. 

One who has been improperly natu- 
ralized may surrender his certificate and 
present a new petition. State v. Papen, 
I Brewst. (Pa.) 623. 



Definition. NATURAL LOVE AND AFFECTION. Definition, 



Af- 



enacted or formulated law on the other.' 

NATURAL LOVE AND AFFECTION — 1. Definaion.— Natural 

love and affection is defined to be '.\\.z.1 affection which a husband, 
a father, a brother, or other near relative naturally feels tov^ard 
those who are so nearly allied to him.^ As to what degree of re- 
lationship will warrant such natural love and affection as will con- 
stitute a consideration, it seems that it must be that which exists 
between a parent and his legitimate child, brother and sister, or 
husband and wife.^ A consideration of natural love and affection 
constitutes a sufficient consideration to support a deed,* but not 
an executory contract.^ This distinction is due to the entire dif- 

wards of ninety years of age, was upon 
his death resisted by his devisee, on the 
ground that the vendor had, by a deed 
executed by him before the date of the 
contract, conveyed the property in fee 
to the devisee, his great nephew. The 
deed was expressed to be in considera- 
tion of natural love and affection, and 
contained a covenant by the grantee to 
"commence" a house upon the property 
according to plans to be furnished by 
the grantor; and that if the grantor 
failed to furnish such plans, then the 
grantee "would build such a house as 
he, the grantee, should think fit." No 
house was ever commenced, and the 
deed contained no proviso for re-entry 
or other penalties for breach of cove- 
nant. Upon a bill by the purchaser for 
specific performance, it was held that 
tfie deed was fnrely voluntary, there 
being an absence of any consideration 
\>j way of pa^'ment or benefit moving 
from the grantee to the grantor, and 
specific performance was decreed ac- 
cordingly. Roshur V. Williams, 44 L.J. 
Ch. 419; 20 L. R.,Eq. 210; 23 W. R. 561. 

4. Kirkpatrick v. Taylor, 43 111. 207; 
Stovall V. Barnett, 4 Litt. (Ky.) 207; 
Hanson v. Buckner, 4 Dana (K3'.) 251; 
Blackerbj' v. Holton, 5 Dana (Ky.) 
520; Beith i". Beith,76 Iowa 601; Hayes 
V. Kershow, i Sandf. Ch. (N. Y.) 258; 
Pennington v. Gittings, 2 Gill & J. 
(Md.) 208; Duvoll V. Wilson, 9 Barb. 
(N. Y.) 487; Marling v. Marling, 9 W. 
Va. 89; s. c, 27 Am. Rep. 543. 

Where a father made this writing: 
"James, I expect to marry soop, and if 
you will settle yourself on the Grayer 
farm, you may have it," it was consid- 
ered bj' the court that the relation of a 
father and son is a good consideration 
to uphold the promise; and it is not in- 
dispensable that it should be expressed 
in terms in the writing of gift, in order 
to make such writing operative. Ford 
V. Ellingwood, 3 Mete. (Ky.) 359. 

5. Kirkpatrick v. Taylor, 45 111. 207;. 



1. Abbott's L. Diet. 

2. 2 Bouv. Law. Diet, Natural 
fection; 2 Steph. Com. 61. 

3. Parent and Child. — See Pierson v. 
Armstrong, i Iowa 282; Kirkpatrick v. 
Taylor, 43 111. 207; Ford v. Ellingwood, 
3 Mete. (Ky.) 359; Knowles v. Erwin, 
43 Hun (N. Y.) 150. 

A consideration of "love and atfec- 
tion" will support a gift of an inherit- 
ance to a daughter. Pierson v. Arm- 
strong, I Iowa 282. 

A aonvej'ance to the widow of the 
grantor's deceased son, of property left 
by the son, may be based on a con- 
sideration of love and affection, which 
will support it as between the parties. 
Beith V. Beith, 76 Iowa 601. 

Natural love and affection for an il- 
legitimate child does not constitute a 
consideration. Blount v. Blount, 2 Law 
Repos. (N. Car.) 587. See also Cains 
V Jones, 5 Yerg (Tenn.) 249. 

The relationship between a grandpar- 
ent and his or her grandchild, will war- 
rant the natural love and affection which 
will constitute a consideration. Han- 
son V. Buckner, 5 Dana (Ky.) 251; 
Stovall V. Barnett, '4 Litt. (Ky.) 207. 

In other cases, however, it is held 
that a deed of land to a legitimate or 
illegitimate grandchild is voluntary, and 
must yield to a subsequent deed, executed 
hona fide, in consideration of money 
or marriage. Cains v. Jones, 5 Yerg. 
(Tenn ) 249; Borum v. King, 37 Ala. 606. 

Brother and Sister. — Bouv. Law 
Diet, Natural Affection. 

Husband and Wife.— 9 Am. & Eng. 
Encyc. of Law, Husband and Wife, 

791. 793- 

Collateral Consanguinity. — C oUateral 
consanguinity is not a meritorious con- 
sideration upon which a court of equity 
will specifically enforce an executory 
covenant or agreement. Hayes v. 
Kershow, i Sandf Ch. (N. Y.) 251. 

A contract for sale for value, which 
had been entered into by a vendor up- 



234 



Befinition. 



NATURALLY. 



Definition. 



ference, as regards the consideration requisite, between deeds 
(being instruments under seal, and, therefore, a consideration often 
unnecessary) and other contracts which are without the presump- 
tinri oi a. Vcvl'„i.bl.: ^cnsiieration afforded by a sea'l.^ Where a 
deed purports to have been executed for a valuable consideration, 
and is impeached by proving that no such consideration was paid, 
it cannot be sustained by showing that it was executed in con- 
sideration of natural love and afTection.^ If a deed recites that 
it was made in consideration of "natural love and affection" and 
for the further consideration of " one dollar" (or any other sum), 
parol proof is admissible to prove other considerations.* An in- 
strument in any form cannot operate as a covenant to stand seized 
for the benefit of another when not founded on the consideration 
of blood or marriage for want of the requisite consideration.* As 
to the application of the consideration of love and affection as 
applied to uses, see that title." 

NATURALLY. — In the usual course of things.** 



Hayes v. Kershow, i Sandf. Ch. (N. 
Y.) 258; DuvoU V. Wilson, 9 Barb. (N. 
Y.) 4S7; I Parsons on Notes, 178, 197; 
Holliday v. Atkinson, 5 B. & C. (E. C. 
L.) 501; Smith V. Kittridge, 21 Vt. 23S; 
Fink V. Cox, 18 Johns. (N. Y.) 145. 
Compare Marling v. Marling, 9 W. 
Va. 89; s. c , 27 Am. Rep. 543, where 
an unsealed instrument running thus: 
"I sine all my interest and claim unto 
Mary Marling and Elizabeth Marling, 
the farm they now live on, coled the 
Harsty farm, as witness my hand and 
sel. Elijah Marling," was supported 
upon a consideration of natural love 
and affection. Comfare also Hayes v. 
Kershow, i Sandf Ch. (N. Y.) 258. 

A promissory note cannot be sup- 
ported on the consideration of blood, 
or of natural love and aifection; some- 
thing more is necessary — some valuable 
consideration — or it cannot be en- 
forced at law or in equity'. Pennington 
V. Gittings, 2 Gill & J. (Md.) 20S; 
DuvoU V. Wilson, 9 Barb. (N. Y.) 4S7. 

Mere blood relationship is not a suf- 
ficient consideration in law to support 
an assumpsit. A stranger to the con- 
sideration cannot sue on a contract, al- 
though there is privity by blood be- 
tween him and the contracting parties, 
and the contract was made for his benefit. 
Tweddle v. Atkinson, i B, & S. 393; 8 
Jur., N. S. 332; 30 L. J., Q^ B. 265; 9 W. 
R. 781; 4L. T., N. S. 468. 

Where a note, expressed to be for 
value received, was made in favor of an 
infant aged nine, and in an action 
against the executors of the maker, no 
evidence of consideration being given. 



the judge told the jury that the note 
being for value received, imported that 
a good consideration existed, and that 
gratitude to the infant's father, or affec- 
tion to the child, would suffice. Held, 
that although the jury might have pre- 
sumed that a good consideration was 
given, yet that those pointed out were 
insufficient. Holliday v. Atkinson, 8 
D. & R. 163; 5 B. & C. SOI. 

The defendant's father owed the 
plaintiff money for goods sold; and for 
the price of these goods the defendant 
made, his note in his own name, and 
gave it to the plaintiff, who was cogniz- 
ant of all the facts, and that the de- 
fendant had received no consideration 
for the note. Held, that the circum- 
stances could not be given in evidence 
under a plea of accommodation bill, 
and that there was in this case an origi- 
nal liability on the part of the defend- 
ant, and that for a good consideration, 
viz, family affection. Cook v. Long, 
Car. & M. (41 E. C. L.) 510. 

1. See Deeds, 5 Am. & Eng. Encyc. 

of Law 435, where the matter of the 

consideration necessary in deeds is 

treated. 

' 2. Burrage v. Beardsley, 16 Ohio 438. 

3. Harvey v. Alexander, i Rand. 
(Va.) 219; Scott V. Scott, I Mass. 527. 

4. Lossee v. Ellis, 13 Hun (N. Y.) 
638; Corwin v. Corwin, 5 N. Y. 342; 
Schott V. Burton. 13 Barb. (N. Y.)i73; 
Rogers v. Eagle Fire Co., 9 Wend. (N. 
Y.) 6n. 

5. Consult in this connection, 2 
Minor's Insts. (3rd ed.) 210, et seq. 

6. Smeed v. Foord, i El. & E. 613; 



235 



Definition. NAUGHTY— NAVIGABLE WATERS. Definition, 

NAUGHTY.— See note i. 

NAVIGABLE WATERS— (See ACCRETION, vol. i, p. 136; Admi- 
ralty, vol. I, p. 193; Boom Companies, vol. 2, p. 469; Boun- 
daries, vol. 2, p. 495; Bridges, vol. 2, p. 540; Dam, vol. 4, p. 
971 ; Ferries, vol. 7, p. 941 ; Fish and Fisheries, vol. 8, p. 23 ; 
Highway, vol. 9, p. 362 ; Ice and Ice Companies, vol. 9, p. 852 ; 
International Law, vol. 11, p. 431; Lakes and Ponds, vol. 
12, p. 610; Logs and Lumber, vol. 13, p. 1018; Mills, vol. 15, 
p. 482 ; Navigation ; Riparian Rights ; Shipping ; Water 
and Watercourses ; Wharves). 



I. Definition, 236. 

1. In America, 236. 

(a) Commerce Carried on 
Over Such Waters Must 
be Valuable, 241.' 

{b) Streams Merely Floatable 
Are Highiuays, 242. 

(c) Navigability Need Not be 
Perennial, 243. 

{d) Navigability Need Not be 
Continuous, 244. 

(e) Waters Artificially Navi- 
gable, 244. 

(/) Other Tests of Naviga- 
bility, 244. 

ig) Proof of Navigability, 

245- 

2. At Common Law, 245. 

(«) The Tidal Test Only a 
Prima Facie One, 246. 

(5) Departures from the Com- 
mon Laiu Doctrine, 246. 

3. By the Civil Lazv, 246. 
II. Classes, 246. 

I. Public, 246. 
(«) Tidal, 247. 

(i) National Dominion 

Over, 247. 
(2) Ownership, 248. 

{a) Fight to Bathe i7i 
the Sea, 24S. 
(i) Nontidal, 2^<). 



(i) Fivers, 249. 
2. Semi-Public, 253. 

III. Jurisdiction, 257. 

1. Over Intra-state Waters, 2^"^. 

2. Over Inter-state Waters, 2z,^. 

IV. Ttie Public Easement of Pas- 

sage, 259. 

1. Definition and Nature, 259. 

2. Ho-w Acquired, 260. 

3. Use of Banks and Shores, 261. 
{a) By the Civil La-w, 261. 

{b) Under the Common La-w, 
261. 
(i) Landing, etc., 261. 

(2) Mooring, etc., 262. 

(3) Towing, etc., 262. 

4. Exercise of the Fight, 263. 

5. Hotu Lost, 264. 
V. improvements, 264. 

1. Legislative Power Over, 264. 

2. Fight of Fiparian Owner to 

Compensation, 265. 
VI. Obstructions, 267. 

1. What Are, 267. 

(«) In General, 267. 

(J) By Boats and Vessels, 268. 

(c) By Fafts and Logs, 269. 

2. From Detention and Diversion 

(See Waters and Water- 
Courses), 270. 

3. Femedies (See NUISANCE; In- 

junction), 270. 



I. Definition — 1. In America. — In the most approved modern 
sense of the term in this country, navigable waters include all 



s.c, 102 E.C.L.612; Mitchell t'. Clarke, 
71 Cal. 164; Kuhn v. Jewett, 32 N. J. 
Eq. 649; Parke v. Frank, 75 Cal. 370. 

1. In Merivale v. Carson, 36 W. R. 
231, Lord Esher, M. R., said: "For 
the defendant it was contended . . . 
that the words 'naughty wife,' as there 
applied (in the newspaper criticism of a 
play), did not necessarily mean an 
adulterous woman. It might be a ques- 
tion for the judge at the trial whether. 



in this particular play, the word 
'naughty' could imply 'adultery,' and the 
court might come to the conclusion 
that it could not, b^' any reasonable 
person, be taken to mean 'adulterous.' 
But unless it was held that there was 
no evidence to go to the jury upon such 
a point, the jury were right in putting 
their interpretation upon the words, 
and I am inclined to agree that such 
was the meaning of the critic." 



236 



Definition. 



NAVIGABLE WATERS. 



In America. 



those which afford a channel for useful commerce, 
are public highways of common right. ^ 



Such waters 



1. American Definition — Waters Navi- 
gable in Fact Are Public Highways.- - 

Alabama. — Bullock v. Wilson, 2 Port. 
(Ala.) 436; State v. Bell, 5 Port. (Ala.) 
365; Rhodes f. Otis, 33 Ala. 57S; Peters 
V. New Ofleans etc. R. Co., 56 Ala. 
528; Walker v. Allen, 72 Ala. 456; 
Lewis V. Coffee Co., 77 Ala. 190; s. c, 
54 Am. Rep. ^5; Sullivan w. Spotswood, 
82 Ala. 163; Olive v. State, 86 Ala. 88, 

93- 

Arkansas. — Little Rock etc. R. Co. 
V. Brooks, 39 Ark. 403; St. Louis etc. 
R. Co. V. Ramsey (Ark.), 13 S. W. Rep. 
931; s. c., 8 L. R., A. 559. 

California. — Gunter v. Geary, i Cal. 
462; American River Water Co. v. 
Amsden, 6 Cal. 443; People v. Gold 
Run Ditch Min. Co., 66 Cal. 13S, 146; 
s. c, 56 Am. Rep. 80. 

Connecticut. — Adams v. Pease, 2 
Conn. 481; Chapman v, Kimball, 9 
Conn. 38, 41; s. c, 21 Am. Dec. 707; 
HoUister v. Union Co., 9 Conn. 436; 
s. c, 25 Am. Dec. 36. 

Georgia. — Young v. Harrison, 6 Ga. 
130, 141 ; Code of Georgia, i8S'2, ^ 2229. 

Illinois. — Middleton v. Pritchard, 4 
111. 510; s. c, 38 Am. Dec. 112; God- 
frey V. Alton, 12 111. 510; s, c, 52 Am. 
Dec. 476; Illinois River Packet Co. v. 
Peoria Bridge Assoc, 38 111. 467; Ens- 
minger v. People, 47 III. 384; s. c, 95 
Am. Dec. 495; Chicago v. McGinn, 51 
111. 266; s. c, 2 Am. Rep. 295; Healy w. 
Joliet etc. R. Co., 2 111. App. 435; 
Washington Ice Co. v. Shortall, loi 111. 
46, 52; s, c, 40 Am. Rep. 196; McCart- 
ney V. Chicago etc. R. Co., 112 III. 6ti, 

634- 

Indiana. — Cox v. State, 3 Blackt. 
(Ind.) 193; Martin v. Bliss, 5 Blackf 
(Ind.) 35; s. c , 32 Am. Dec, 52; Depew 
V. Trustees of Wabash etc. Canal, 5 Ind. 
9; St. Joseph Co. V. Pidge, 5 Ind. 13; 
Neaderhouser v. State, 28 Ind. 257; 
Bainbridge v. Sherlock, 29 Ind. 364; 
.s. c, 95 Am. Dec. 644; Sherlock v. 
Bainbridge, 41 Ind. 35; s. c, 13 Am. Rep. 
302; Ross V. Faust, 54 Ind. 471; s. c, 
23 Am. Rei'p. 655. 

lo-wa. — McManus v. Carmichael, 3 
Iowa I ; Steamboat "Globe" v. Kurtz, 
4 G. Greene (Iowa) 433; Tomlin v. Du- 
buque etc. R. Co., 32 Iowa 106; s. c, 7 
Am. Rep. 176; Wood v. Chicago etc. 
R. Co., 60 Iowa 4!;6. 

Kansas. — Wood v. Fowler, 26 Kan. 
682; o. I,., 40 Am. Rep. 330. 



237 



Kentucky. — Green & Barren River 
Nav. Co. V. Palmer, 83 Ky. 646; Ken- 
tucky Lumber Co. v. Green, 87 Ky. 

257. 25S. 

Louisiana. — Boykin v. Shaffer, 13 
La. An. 129; Ingram v. Police Jur3' of 
St. Tammany, 20 La. An. 226; Good- 
will V. Bossier Police Jury, 38 La. An. 

752. 755- 

Maine.- — Berrj' v. Carle, 3 Me. 269; 
Spring V. Russell, 7 Me. 290; Moor v. 
Veazie, 31 Me. 360; Brown v. Chad- 
bourne, 31 Me. 9, 21; s. c, 50 Am. Dec. 
641; Treat v. Lord, 42 Me. 552; s. c, 66 
Am. Dec. 298; Parsons v. Clark, 76 
Me. 476. 

Maryland. — 2 Public Gen. Laws 
1888, art. 54, § 44; art. 98, § 21; Albert 
V. State, 66 Md. 325, 366; s. c, 59 Am. 
Rep. 159. 

Massachusetts.— Q,om'cao'a.vsa\.t\\ v. 
Chapin, 5 Pick. (Mass.) 199; Ingraham 
V. Wilkinson, 4 Pick. (Mass.) 26S; s. c, 
16 Am. Dec. 342; Commonwealth v. 
Alger, 7 Cush. (Mass.) 53, 82; Blood w. 
Nashua etc. R. Co., 2 Gray (Mass.) 
137, 139; s. c, 61 Am. Dec. 444. 

Michigan.— L,a. Plaisance Bay Har- 
bor Co. V. Monroe, Walk. (Mich.) 
155; Lorman v. Benson, 8 Mich. 18; 
s. c, 77 Am. Dec. 435; Tyler v. People, 
8 Mich. 320; Ryan v. Brown, 18 Mich. 
195, 207; Thunder Bay River Booming 
Co. V. Speechly, 31 Mich. 336; s. c, 18 
Am. Rep. 184; Buttei-field -u. Gilchrist, 
53 Mich. 22; Turner v. Holland, 54 
Mich. 300; 65 Mich. 453. 

Minnesota. — Castner v The Steam- 
boat Dr. Franklin, i Minn. 73; Schur- 
meier v. St. Paul etc. R. Co., 10 Minn. 
82; s. c, 88 Am. Dec. 59; Swanson v. 
Mississippi etc. Boom Co., 42 Minn. 
532- 

Mississippi. — Morgan t<. Reading, 3 
Smed. & M. (Miss.) 366; Comm. of Ho- 
mochitto River w. Withers, 29 Miss. 21, 
37; Smith V. Louisville etc. R. Co., 62 
Miss. 510, 512; Smith v. Fonda, 64 Miss. 

551- 

Missouri. — O'Fallon v. Daggett, 4 
Mo. 343, 347; s. c, 2g Am. Dec. 640; 
Benson v. Morrow, 61 Mo. 345; Meyers 
V. St. Louis, 8 Mo. App. 266, 272. 

New Hampshire. — Carter v. Thurs- 
ton, 58 N. H. 104; s. i;., 42 Am. Rep. 
i;84; Thompson v. Androscoggen River 
Imp. Co., 58 N. H. 108. 

Netv Jersey. — Attorney General v. 
Delaware etc. R. Co., 27 N.J. Eq. i, 7; 



Definition, 



NAVIGABLE WATERS. 



In America. 



Lister v. Newark Plank Road Co., 36 
N. J. Eq. 477. 

New Tork. — Palmer v. Mulligan, 3 
Cai. (N. Y.) 308; s. c, 2 Am. Dec. 270; 
Hooker v. Cummings, 20 Johns. (N. 
Y.) go; s. c, 11 Am. Dec. 249; People 
V. Canal Appraisers, 13 Wend. (N. Y.) 
355; People V. Canal Appraisers, 33 N. 
Y. 461 ; Chenango Bridge Co. v. Paige, 
83 N. Y. 178; Morgan v. King, 18 Barb. 
(N. Y.) 277, 2S3; s. c, 35 N. Y. 454, 
459; o. c, 91 Am. Dec. 58; Roberts v. 
Baumgarten, no N. Y. 380, 383. 

North Carolina. — Wilson v. Forbes, 
2 Dev. (N. Car.) 30, 34; Ingram v. 
Threadgill, 3 Dev, (N. Car.) 59, 61; 
Ctollins V. Benbury, 5 Ired. (N. Car.) 
118; s. c, 42 Am. I)ec. 155; Fagan v. 
Armistead, 11 Ired. (N. Car.) 433; 
State V. Dibble, 4 Jones (N. Car.) 107, 
no; Davis i;. Jerkins, 5 Jones (N. Car.) 
290, 292; BroadnaxTi. Baker, 94 N. Car. 
675, 681; o. c, 55 Am. Rep. 633; Hodges 
V. Williams, 95 N. Car. 331, 335; s. c, 
59 Am. Rep. 242; State v. Narrows 
island Club, 100 N. Car. 477, 481. 

Ohio. — Gavit v. Chambers, 3 Ohio 
495, 498; Lamb v. Rickets, 11 Ohio 311, 
315; Walker v. Board of Public Works, 
16 Ohio 540, 544; Hickok v. Hine, 23 
Ohio St. 523, 527; s. c, 13 Am. Rep. 

Oregon. — Weise v. Smith, 3 Oregon 
445; Haines v. Welch, 14 Oregon 319. 

Pennsylvania. — Carbon v. Blazer, z 
Binn. (Pa.) 475; s. c, 4 Am. Dec. 463; 
Shrunk v. Schujlkill Nav. Co., 14 S. & 
R. (Pa.') 71, Bird v. Smith, 8 Watts 
(Pa.) 434, s. t., 34 Am. Dec. 483; Johns 
V. Davidson, 16 Pa. St. 512, 522; Bar- 
clay R. & Coal Co. V. Ingham, 36 
Pa'. St. 194, 200; Com. V. Fisher, i 
P. & W. (Pa.) 462; Flanagan v. Phila- 
delphia, 42 Pa. St. 219; Monongahela 
Bridge Co. v. Kirk, 46 Pa. St. 112, 120; 
s. c, 84 Am. Dec. 527; McKeon v. 
Delaware Division Canal Co., 49 Pa. 
St. 424, 433; Stover V. Jack, 60 Pa. St. 
339; Wainwright v. McCuUough, 63 
Pa. St. 66, 73; Poor -■. McClure, 77 Pa. 
St. 214; Pursell V. Stover, no Pa. St. 
43, 46; Fulmer v. WiUiams, 122 Pa. St. 
191, 

South Carolina. — Gates v. Wadling- 
ton, I McCord (S. Car.1 c;8o; s. c, 10 
Am. Dec. 699. But see McCullough v. 
Wall, 4 Rich. (S. Car.) 68; Shands v. 
Triplet, 5 Rich. Eq. (S. Car.) 76,79. 

Tennessee. — Elder i'. Burrus, 6 . 
Humph. (Tenn.) 358; Stuart i;. Clark, 
2 Swan. (Tenn.) i; s. c, 58 Am. Dec. 
49; Sigler V. State, 7 Baxt. (Tenn.) 493; 
Holbert v. Endens, 5 Lea (Tenn.) 204, 



207; s. c, 40 Am. Rep. 26; Goodwin v. 
Thompson, 15 Lea (Tenn.) 209; s. c, 
54 Am. Rep. 410. 

Texas. — Selman v. Wolfe, 27 Tex. 68. 

West Virginia. — Ravenswood v. 
Flemings, 22 W. Va. 52; s. c, 46 Am. 
Rep. 4S5; Barre v. Fleming, 29 W. Va. 
314; Gaston v. Mace, 33 W. Va. 14. 

Wisconsin. — Walker v. Shepardson, 
4 Wis. 486; s. c, 2 Wis. 384; s. c, 60 
Am. Dec. 423; Boorman t;.* Sunnuchs, 
42 Wis. 233; Diedrich v. Northwestern 
R. Co., 42 Wis. 248, 263; Black River 
Flooding Dam Assoc, v. Ketchum, 54 
Wis. 313; Norcross ii. Griffiths, 65 Wis. 
599; 56 Am. Rep. 642. 

United States. — Ordinance of 1787, 
art. 4; Georgetown v. Alexandria Canal 
Co., 12 Pet. (U. S.) 91, 97; Bowman v. 
Wathen, 2 McLean (U. S.) 376, 382; 
The Genesee Chief v. Fitzhugh, 12 
How. (U. S.) '443; Railroad Co. v. 
Schurmeir, 7 Wall. (U. S.) 272; Rundle 
V. Delaware etc. Canal Co., 14 How. 
(U. S.) 79; The Daniel Ball, 10 Wall. 
(U. S.) 557; The Montello, 20 Wall. 
(U. S ) 430; Barney f. Keokuk, 94 U. 
S. 324, 338; Pound V. Teurck, 95 U. S. 

459- 

It will be noticed that, in some of the 
earlier of these cases, the term ''navi- 
gable" is used in its common law sense 
(see i?ifra), but they nevertheless con- 
firmed the general principle stated in 
the text. There is a marked unanimity 
in the later authorites from almost every 
State in support of the American rule. 
A few excerpts from leading opinions 
will serve to illustrate the development 
of the law on this subject and the trend 
of late decisions. 

TiLGHMAN, C. J.: It is said, how- 
ever, that some of the cases assert, that 
by navigable waters are meant, rivers 
in which there is no [a?] flow or reflow 
of the tide. This definition may be very 
proper in England, where there is no 
river of considerable importance as to 
navigation, which has not a flow of the 
tide; but it would be highly' unreason- 
able when applied to our large rivers, 
such as the Ohio, Alleghany, Dela- 
ware, Schuylkill, or Susquehanna, and 
its branches. Carson v. Blazer, 2 Binn. 
(Pa.) 475, 478; n. c, 4 Am. Dec. 463. 

TuRLEY, J.: All laws are or ought 
to be, an adaptation of principles of 
action to the state and condition of a 
country, and to its moral and social 
position. . . The insular position 

of Great Britain, the short courses of her 
rivers, and the well known fact that 
there are none of them navigable above 



238 



Definition. 



NAVIGABLE WATERS. 



In America. 



tide-water but for very small craft, well 
warrants the distinction there drawn by 
the common law. But very different is 
the situation of the continental powers 
of Europe in this particular. Their 
streams are many of them large and 
long, and navigable to a great extent 
above tide water, and accordingly we 
find that the civil law which regulates 
and governs those countries has 
adopted a very dilferent rule as to what 
are or are not navigable streams, and 
by it all rivers, even abov tide-water, 
provided they are navigable for ships 
or boats, are considered as public pro- 
perty. Now, these principles of the 
common and civil law are not in con- 
flict with one another; they are both 
right and proper for the countries to 
which they aVe made to appl3'. In 
England there are no streams naviga- 
ble above tide -water; but the reverse is 
true of the continent, and the end de- 
signed to be effected, both by the com- 
mon and civil law upon this subject, is 
identical — viz, that navigable waters 
shall not become private property, but 
shall belong to the community at large. 

If the local situation of the continent 
of Europe required an extension of the 
construction of what was necessary to 
constitute a navigable river, and pre- 
vented its restriction to tide-water 
much more so does that of our own 
country, and particularl_v the valley' of 
the Mississippi. Elder v. Burrus, 6 
Humph. (Tenn.) 358, 366-7 (1845). 

, Wells, J.: If a stream could be 
subject to public servitude by long use 
only, many large rivers in newly settled 
States, and some in the interior of this 
State, would be altogether under the 
control and dominion of the owners of 
their beds, and the community would 
be deprived of the use of those rivers, 
which nature has plainly declared to be 
public highways. The true test, there- 
fore, to be applied in such cases, is, 
whether a stream is inherently and 
in its nature, capable of being used for 
the purposes of commerce, for the 
floating of vessels, boats, rafts or logs. 
Brown v. Chadbourne, 31 Me. 9, 21; 
s. c, 50. Am. Dec. 641. 

Woodward, J.: It is navigability 
in fact, which forms the foundation for 
navigability in law; and from the fact 
follows the appropriation to public use, 
and hence its publicity and legal navi- 
gability. ... It is impossible to 
bring the mind to an ' approval, 
when we attempt to apply to the rivers ■ 
of this country, stretching up to three 



239 



thousand miles of extent — flowing 
through or between numerous and in- 
dependent States, and bearing a com- 
merce which competes with that of the 
oceans — a test which might be applica- 
ble to an island not so large as some 
two of our States; and to streams whose 
utmost length was less than three hun- 
dred miles, and whose outlet and foun- 
tain, at the same time, could be within 
the same State jurisdiction. In Eng- 
land or in Great Britain, the chief 
rivers are the Severn, Thames, Kent, 
Kumber, and Mersey; the latter of 
which is about fifty, and the first about 
three hundred miles in length, and of 
this (the Severn) about one hundred 
miles consist of the Bristol Channel. 
The world renowned Thames has the 
diminutive proportion of two hundred 
miles. And of even these lengths, 
not the whole is navigable. Thus it 
will be seen that these chief rivers of 
good old England, range in extent with 
our Connecticut, Merrimac, Hudson, 
Alleghany, Monongahela, Cedar, Iowa, 
and Des Moines, and bear a proportion 
of one to twenty, when compared with 
the greater rivers of this continent. 
McManus v. Carmichael, 3 Iowa i, 
30-1 (1856). 

Read, J.: We are aware by the 
common law of England, such streams 
as the Mississippi, the Missouri, the 
rivers Amazon and Plate, the Rhine, 
the Danube, the Po, the Nile, the 
Euphrates, the Ganges and the Indus, 
were not navigable rivers, but were the 
subject of private property, whilst an 
insignificant creek in a small island was 
elevated to the dignity of a public river, 
because it was so near the ocean that 
the tide ebbed and flowed up the whole 
of its petty course. The Roman law, 
which has pervaded continental 
Europe, and which took its rise in a 
country where there was a tideless sea, 
recognized all rivers as navigable 
which were really so, and this common- 
sense view was adopted by the early 
founders of Pennsylvania, whose pro- 
vince was intersected by large and 
valuable streams, some of which are a 
mile in breadth. Monongahela Bridge 
Co. -'. Kirk, 46 Pa. St. 112, 120-1; s. c, 
85 Am. Dec. 527. 

Upton, J.: It may be .considered 
the settled law of the United States, 
that so much of the doctrine of the 
common law of England, as made the 
ebb and flow of the tide a test of navi- 
gability, is not now applicable in the 
United States. On the contrary, the 



Definition. 



NAVIGABLE WATERS. 



In America. 



maxim of Lord Mansfield, "out of the 
fact arises the right," is applied by the 
courts of this country, citing Morgan 
V. King, 35 N. Y. 454; s. c, 91 Am. 
Dec. 58; Jones v. Pettibone, 2 Wis. 
308; Weise v. Smith, 3 Oreg. 435, 
448. 

Field, J.: The doctrine of the com- 
mon law as to the navigability of 
waters has no application in this coun- 
try. Here the ebb and flow of the tide 
do not constitute the usual test, as in 
E^igland, or any test at all of the navi- 
gabilitj' of waters. There, no waters 
are navigable in fact, or at least to any 
considerable extent, which are not sub- 
ject to the tide, and from this circum- 
stance tide water and navigable water 
there signify substantially the same 
thing. But in this countrj' the case is 
widely different. Some of our rivers 
are as navigable for miany hundreds of 
miles above as thej' are below the 
limits of tide water, and some of them 
are navigable for great distances by 
Jarge vessels, which are not even af- 
fected by the tide at any point during 
their entire length. A different test 
must, therefore, be applied to determine 
the navigability of our rivers, and that 
is found in their navigable capacity. 
Those rivers must be regarded as pub- 
lic navigable rivers in law which are 
navigable in fact. And they are navi- 
gable in fact when thej' are used, or are 
susceptible of being used, in their ordi- 
nary condition, as highways for com- 
merce, over which trade and travel are 
or may be conducted in the customary 
modes of trade and travel on "water. 
The Daniel Ball, 10 Wall. (U. S.) 557, 

563- 
Day, J.: A river is regarded as 
navigable which is capable of floating 
to market the products of the country 
through which it passes, or upon which 
commerce may be conducted; and, 
from the fact of its being so navigable, 
it becomes in law a public river or 
highway. The character of a river, as 
such highway, is not so much deter- 
mined by the frequency of its use for that 
purpose as it is hy its capacity' of being 
used by the public for purposes of 
transportation and commerce. Hickok 
V. Mine, 23 Ohio St. 523, 527; s. c, 
13 Am. Rep. 255. 

Davis, J.: It would be a narrow 
rule to hold that in this countr3', unless 
a river was capable of being navigated 
by steam or sail vessels, it could not be 
treated as a public highway. The ca- 
pability of use by the public for pur- 



poses of transportation and commerce 
affords the true criterion of the navi- 
gability of a river, rather than the ex- 
tent and manner of that use. If it be 
capable in its natural state of being 
used for purposes of commerce, no 
matter in what mode the commerce 
may be conducted, it is navigable in 
fact, and becomes in law a public river 
or highway. The Montello, 20 Wall. 
(U. 8.) 430, 441-2. 

Foster, J.: The public easement is 
not, as was formerly inferred by our 
courts (Scott V. Willson, 3 N. H. 321, 
325), founded upon usage, custom or 
prescription. Any stream capable of 
being generally and commonly useful 
for some purpose of trade, and the 
transportation of property, whether by 
steamers, or sailing vessels, or oar- 
boats, or rafts, is a public stream. Car- 
ter V. Thurston, 58 N. H. 104, 106-7; 
s. c, 42 Am. Rep. 584. 

Ryan, C. J.: Waters at the com- 
mon law were called navigable, only 
when affected by the ebb and flow of 
the tide. Of course in this. State, 
bounded on one side by a great fresh- 
water sea, and on another \>y a great 
river, which, with its confluents, con- 
stitutes perhaps the most extensive in- 
land navigation in the world, and hav- 
ing within it many streams and bodies 
of water capable of navigation and 
actually' navigated, there is no water 
subject to the ebb and flow of the tide, 
or called navigable at the common law. 
Here, therefore, the restricted sense of 
the word navigable, at the common law, 
is wholl3' inappropriate to the actual 
conditions of things. Waters are here 
held navigable when capable of navi- 
gation in fact, without other condition. 
And when we use the terms navigable 
or unnavigable, we mean capable or in- 
capable of actual navigation. Died- 
rich XK Northwestern R. Co., 42 Wis. 
24S, 268. 

Bailey, J.: It may be remarked 
that none of the streams or water- 
courses within this State are navigable 
in the sense of the common law. No 
rivers, by the common law, are naviga- 
ble above the ebb and flow of the tide; 
and as this State is situated many hun- 
dred miles above the highest point at 
which the tide ebbs and flows in 
the Mississippi and St. Lawrence, to 
which all our waters are tributary, it is 
manifest that the classification of waters 
into navigable and non-navigable by 
the common law rule, at least so far as 
relates to the public easement, can have 



240 



Sefinicion. 



NAVIGABLE WATERS. 



In America. 



{d) Commerce Carried 07t Over Such Waters Must be Valitable. 
— In order that waters may be navigable in the legal sense, com- 
rherce must be carried on over them which is of an essentially 
valuable character.^ 



no application here, llealy -•. Joliet 
etc. R. Co., 2 111. App. 435, 439. 

Brickell, C.J.: It is not the ebb 
and flow of the tide which, as in Eng- 
land, constitutes the usual, or, it may 
be said, any test at all of the naviga- 
bility of waters, b^' which we mean their 
subjection to public use. The test is 
the adaptability of the waters to the 
purposes of navigation; whether they 
are, or in fact have been, used by the 
public, or are capable of being used, in 
their natural condition, as highway's 
for commerce; for trade and travel; for 
the transportation of the products of 
the country, of its industries, of its 
fields, forests or mines, in the custom- 
ary modes of such transportation. 
Walker v. Allen, 72 Ala. 456, 457-8. 

Smith, C. J.: Navigable waters, 
constituting highways, are not ascer- 
tained here, as they are in Engla7id, an 
island accessible to ocean tides, by the 
extent of their ebb and flow, but by a 
more practical test of their capacity to 
float boats used as instruments of com- 
merce, in the interchange of commodi- 
ties, and large enough for the purpose. 
. Broadnax %>■ Baker, 94 X. Car. 675, 
681; s.c, 55 .\m. Rep. 633. 

Green, J.: The great mass of the 
commerce of the United States is 
transported on waters in which the tide 
does not ebb and flow. And even when 
it is moved upon streams on which the 
tide does ebb and flow it is only for a 
comparatively short distance, while, for 
nearly the whole distance, it has been 
moved from above the tide -water sec- 
tion of the country. Indeed, this is the 
case in many States of the Union that 
carry on a large commerce, and ■ in 
which there is no tide water — our own 
State for instance. But in none of 
these States has it ever been held that 
these are not navigable streams, simply 
because there was no ebb or flow of the 
tide. Gaston v. Mace, 33 W, Va. 14, 
20. 

Battle, J.: The ebb and flow ot 
the tide is merely an arbitrary test, 
since many waters where the tide flows 
are not in fact navigable, and many, 
especially on the continent, where it 
does not flow, are navigable. . . . 
While in England the ebb and flow of 



16 C. of L.— 16 



the tide is the most convenient, certain 
and usual test of the navigability' of 
rivers, as the tide does in fact ebb and 
flow in all its navigable ri\'ers, it is 
wholly inapplicable in this country, 
where there are large fresh water ri\'ers 
thousands of miles long, flowing almost 
across the entire continent, bearing 
upon their bosom the commerce of the 
outside world in part, a? well as of the 
continent. St. Louis etc. R. Co. r'. 
Ramsev (Ark.), 13 S. W. Rep. 931; 
s. c 8 L. R., A. 559, 561. 

1. Burrows v. Gallup, 32 Conn. 493. 
501; s. c, 87 Am. Dec. 186; Xeader- 
house V. State, 28 Ind. 257: Woodman 
f . Pittman, 79 Me. 456; Charleston v, 
Middlesex Co., 3 >Ietc. (Mass.) 202; 
Murdock i\ Stickney, 8 Cush. (Mass.) 
113. 115; Rowe f. Granite Bridge Cofp., 
21 Pick. (Mass.) 344. 

"But this language is applied to the 
capacity of the stream, and is not in- 
tended to be a strict enumeration of the 
uses to which it must be actually ap- 
plied in order to give it this character. 
Xavigable streams arehighwavs; and a 
traveller for pleasure is as fully entitled 
to protection in using a public high- 
way, whether b3' land or by water, as a 
traveller for business.'' Per Ch.vp- 
MAX, C. J., in Attorney General v. 
Woods, loS Mass. 436, 439. 

But it was held in Burrows v. Whit- 
wam, 59 Mich. 279, that "The fact that 
the public have used a river after a dam 
was built across it, for pleasure boating 
or fishing, has no tendency whatever to 
prove it navigable." 

Town of 'Wethersfield v. Humphrey, 
20 Conn. 217, was a proceeding against 
certain parties for obstructing naviga- 
tion. In order to furnish access to a 
ferry, they had laid out a highway 
across the mouth of Keeney's Cove, an 
inlet from the Connecticut River, in 
which the tide ebbed and flowed, The 
court held that the obstruction com- 
plained of did not constitute a public 
nuisance, and in the course of the 
opinion said (p. 227): "This cove can- 
not be said to be navigable by any 
craft whatever, though at times a fish 
boat or skift" or Indian canoe may be 
pushed through its waters; or, in the 
winter months occasionally, a small 



241 



Definition. 



NAVIGABLE WATERS. 



In America. 



{h) Streams merely floatable are highways. But such commerce 
need not be conducted by means of boats and vessels ; watei;s 
which are capable only of floating rafts and logs are public high- 
ways for that purpose. 1 



sea boat is laid up to avoid tiie ice of 
the river. But tliis is not navigation. 
That onlj' is such, and those onlj are 
navigable waters where the public pass 
and repass upon them with vessels or 
boats in the prosecution of useful oc- 
cupations. There must be some com- 
merce or navigation which is essen- 
tially valuable. A hunter or fisherman, 
by drawing his boat through the waters 
of a brook or shallow creek, does not 
create navigation, or constitute their 
waters channels of commerce." 

It has also been held that the prop- 
erty which is the subject of such com- 
merce, must be "conducted by the 
agency of man." Munson v. Hunger- 
ford, 6 Barb. (N. Y.) 265. But .this 
doctrine was not followed in Morgan v. 
Kiug, iS Barb. (N. Y.) 227. 

1. Lewis V. Coffee Co., 77 Ala. 190; 
s. c, 54 Am. Rep. 55; Sullivan v. Jer- 
nigan, 21 Fla. 264; Berry v. Carle, 3 
Me. 269; Spring v. Russell, 7 Me. 273; 
Wadsworth v. Smith, n Me. 278; ». c, 
26 Am. Dec. 525; Brown z'. Chadbourne, 
31 Me. 9; s. c, 50 Am. Dec. 641; Knox 
V. Chaloner, 42 Me. 150; Treat v. Lord, 
42 Me. 552; s. c, 66 Am. Dec. 298; 
Brown v. Black, 43 Me. 443; Veazie v. 
Dwinel, 50 Me. 479; Gerrish ?'. Brown, 
51 Me. 256; s. c, 81 Am. Dec. 569; 
Davis V. Winslow, 51 Me. 264; s. c, 81 
Am. Dec. 573; Lancey v. Clifford, 54 
Me. 4S7; s. c, 92 Am. Dec. 561; Moore 
V. Sanborne, 2 Mich. 520; s. c, 59 Am. 
Dec. 209; Thunder Bay River Booming 
Co. V. Speechlj', 31 Mich. 336; s. c, 18 
Am. Rep. 184; Thompson v. Andros- 
cogginCo.,54 N. H.545; Carters. Thurs- 
ton, 58 N. H. 104; s. c, \2 Am. Rep. 584; 
Shaw V. Crawford, 10 Johns. (N. Y.) 
236; Brown v. Scofield, S Barb. (N. Y.) 
239; Morgan v. King, 18 Barb. (N. Y.) 
277, 284; 30 Barb. (N. Y.) 90; 35 N. Y. 
454; ». c, 91 Am. Dec. 58; Town of 
Pierrepont v. Loveless, 72 N. Y. 211, 
216; Weise v. Smith, 3 Oreg. 445; 
Felger v. Robinson, 3 Oreg. 455; Shaw 
V. Oswego Iron Co., 10 Oreg. 371; s. c, 
45 Am. Rep. 146; Stuart v. Clark, 2 
Swan (Tenn.) 16; ». u., 58 Am. Dec. 
49; Gatson v. Mace, 33 W. Va. 14; 
Whisler v. Wilkinson, 22 Wis. 572; 
Sellers v. Union Lumbering Co., 39 
Wis. 525; Olson V. Merrill, 42 Wis. 203, 



212; Cohn V. Wausau Boom Co., 47 
Wis. 324; Weatherby v. Meiklejohn, 1:6 
Wis. 73; Herman v. Beef Slough Mfg. 
etc. Co., 8 Biss. (U. S.) 334; i Fed. 
Rep. 145; United States v. Mississippi 
etc. Boom Co., 3 fed. Rep. 548; Esson 
V. M'Master, i Kerr (N. Brunswick) 
501; Rower v. Titus, i Allen (N. 
Brunswick) 326, 333; Boissonault i>. 
Olivia, Stuart (Lower Canada) 564. 

"Upon many of our streams, al- 
though of sufficient capacity for navi- 
gation b_v boats, thej' are never seen — 
whilst rafts of lumber of immense 
value, and mill logs which are counted 
by thousands, are annually floated 
along them to market. Accordingly we 
find that a capacity to float rafts and 
logs in those States where the manufac- 
ture of lumber is prosecuted as a branch 
of trade, is recognized as a criterion of 
the public right of passage and of use, 
upon the principle already' adverted to, 
that such right is to be ascertained 
from the public necessity and occasion 
for such use." Per Martin, J., in 
Moore v. Sanboiu-ne, 2 Mich. 520, 526. 

Qualiflcatious of This Rule— (See also 
next note) — South Carolina. "Al- 
though we cannot define by technical 
terms what constitutes a navigable 
river in this State, yet I presume we 
may venture to say that cannot be con- 
sidered a navigable river, the natural 
obstructions of which prevent the pas- 
sage of boats of anj' description what- 
ever."' Per NoTT, J., in Cates v. Wad- 
lington, I McCord (S. Car.) 582; s. c, 
10 Am. Dec. 699. 

California. — In American River 
Water Co. v. Amsden, 6 Cal. 4^3, it 
was held that while a stream is naviga- 
ble which can float rafts of lumber, it 
it is not so if it only have capacity for 
floating logs and planlis. 

On the other hand, in Pennsylvania^ 
a stream declared by statute to be a 
public highway for the passage of 
"boats and rafts," is open to the public 
use for floating logs, though not fas- 
tened together. Deddrick v. Wood, 15 
Pa. St. 9. 

Restrictions on the Bight of Floatage. 
— It has been held that streams in 
which logs cannot be floated without 
being propelled by persons on the 



242 



Definition. 



NAVIGABLE WATERS. 



In America. 



{c) Navigability Need Not be Perennial. — It is not necessary 
that such waters be fit for navigation at all times, but their capa- 
city therefor must recur with regularity.^ 



banks, are not navigable. Brown v. 
Chadbourne, 31 Me. 9; s. c, 50 Am. 
Dec. 60; Treat v. Lord, 42 Me. 552; 
s. c, 66 Am. Dec. 298; Morgan v. 
King, 35 N. Y. 454; s. c, 91 Am. Dec. 
58. But this rule has not been adopted 
in Wisconsin. Olson f. Merrill, 42 Wis. 
203, 212. See also Weise v. Smith, 3 
Oreg. 445. 

In Michigan, a private stream capa- 
ble of floatage cannot be used for 
floating logs not cut near its banks. 
Koopman v. Blodgett (Mich.), 14 N. W. 
Rep. 909. And the language of other 
decisions would seem to limit this right 
to the transportation of the products of 
lands adjacent to tlie banks of the 
stream. See Smith v. Fonda, 64 Miss. 
5Si> 554; Morgan v. King, 35 N. Y. 
454. 4595 s. c, 91 Am. Dec. 58. 

On a stream which is valuable for 
floatage, but not for xnavigation in the 
more enlarged sense, it cannot be said 
that the right of floatage is so far para- 
mount to the use of the water for ma- 
chinery as to authorize the sacrifice of 
the latter for the former interest. 
Middleton v. Flat River Booming Co., 
27 Mich. 533. 

At thfise times when a stream is not 
naturally floatable, an upper riparian 
owner has no right to detain the water 
until a flood can be caused, to the detri- 
ment of a lower proprietor, suflicient 
for floating logs. Thunder Bay River 
Booming Co. -u. Speechly, 31 Mich. 
336; s. c, iS Am. Rep. 184; Witheral v. 
Muskegon Booming Co., 68 Mich. 48. 

1. Navigability Need Not l)e Perennial. 
— Walker v. Allen, 72 Ala. 456; Little 
Rock etc. R. Co. v. Brooks, 39 Ark. 
403, 409; Moore v. Sanborne, 2 Mich. 
519; s. c, 59 Am. Dec. 209; Thunder 
Baj' River Booming Co. v. Speechly, 
31 Mich. 336; s. c, 18 Am. Rep. 184; 
Hogg V. Zanesville etc. Canal Co., 1; 
Ohio 410, 422; Olson v. Merrill, 42 Wis. 
203, 212. 

But It Must be Periodical. — Lewis v. 
Coffee Co., 77 Ala. 190; s. c, 54 Am. 
Rep. 55; Smith v. Fonda, 64 Miss. 551; 
Haines v. Hall, 17 Oreg. 165; Olson v. 
Merrill, 42 Wis. 203. 

Streams Periodically Floatable. — The 
decisions are not harmonious respecting 
the right of the public to use streams 
which are capable onl}' of floatage, and 
that for but a portion of the year. In 



243 



States where the lumber industry is im- 
portant, such streams are held to be 
subject to the public use during times 
when they have sufficient capacity. 
Brown v. Chadbourne, 31 Me. 9; s. c. 
50 Am. Dec. 641; Smith w. Fonda, 64 
Miss. 551, 559; Weise v. Smith, 3 Oreg. 
445; Shaw V. Oswego Iron Co., 10 
Oreg. 371. See also the dictum in IBar- 
clay R. & Coal Co. v. Ingham, 36 Pa. 
St. 201, 202. 

Martin-, J.: "It is a valuable, rather 
than a continual use. which determines 
the public right." Moore x'. Sanborne, 
2 Mich. 526; s. c, 59 Am. Dec. 207. 

Danforth, J.: "In order to make a 
stream floatable, it is not necessary that 
it should be so at all seasons of the year. 
It is suflicient if it have that character 
at different periods with reasonable cer- 
tainty and for such a length of time as 
to make it profitable for that purpose." 
Holden %'. Robinson Mfg. Co., 65 Me. 
216. 

Boise, C.J. : "We hold the law to be, 
that any stream in this State is navi- 
gable on whose waters logs or timbers 
can be floated to market, and that they 
are public highways for that purpose, 
and that it is not necessar3' that they be 
navigable the whole year for that pur- 
pose to constitute them such. If at 
high water they can be used for floating 
timber, then thej' are navigable." Fel- 
ger V. Robinson, 3 Oreg. 457-8; citing 
Moor V. Veazie, 32 Me. 343; s. c, 52 
Am. Dec. 655; Treat v. Lord, 42 Me. 
552; s. c, 66 Am. Dec. 298; Brown v. 
Scofield, 8 Barb. (N. Y.) 243. 

But "however necessary it may be in 
the great lumbering States of Maine and 
Michigan, that private rights should 
yield to the prevailing interest, no such 
necessity exists in this State." Breese, 
J., in Hubbard v. Bell, 54 111. no, 118; 
s. c, 5 Am. Rep. 98. 

And in other States the rule is laid 
down that small streams capable of 
floating logs only during a freshet or for 
a limited portion of the year, are not 
subject to the public easement of float- 
age. Rhodes v. Otis, 33 Ala. 578; Lewis 
V. Coffee Co., 77 Ala. 190; ». c, 54 Am. 
Rep. 55; Cardwell v. Sacramento Co., 
79 Cal. 347; Rowe v. Granite Bridge 
Corp., 21 Pick. (Mass.) 344; Munson-y. 
Hungerford, 6 Barb. (N. Y.) 265; Cur- 
tis V. Keesler, 14 Barb. (N. Y.) 511; 



Definition. 



NAVIGABLE WATERS. 



In America. 



id) Navigability Need Not be Continuous. — Nor is it essential 
that waters, in order to be navigable, afford a continuous passage 
throughout their entire extent for water-craft or logs.^ 

{e) Waters Artificially Navigable. — Most of the authorities -limit 
the term navigable to waters having a natural and inherent capa- 
city for navigation. ** 

(/) Other Tests of Navigability. — In addition to the general 
criterion of adaptabilit}- for the purposes of commerce, which all 
the American authorities emphasize, other tests of navigability 
are stated in some of the cases and will be found in the nofes.^ 



Morgan v. King, iS Barb. (N. Y.) 277; 
30 Barb. i-N. Y.) 9; 35 N. Y. 454; s. c, 
91 Am. Dec. 58; Haines v. Welch, 14 
Oreg. 319; Haines v. Hall, 17 Oreg. 165. 

If, however, such stream is so used 
without objection for twenty years, it is 
a public tfioroughfare. Stump v. Mc- 
Nairy, 5 Humph. (Tenn.) 363; s. c, 42 
Am. Dec. 437. 

On the general subject of streams 
periodically navigable, see articles in 5 
Albany Law Journal, 359 and 407. 

1. Walker v. Allen", 72 Ala. 456; 
Brown v. Chadbourne, 31 Me. g, 25; 
s. c, 50 Am. Dec. 64T; Morgan w. King, 
iSBarb. (N .Y.) 277; Broadnaxt). Baker, 
94 N. Car. 675, 681; s. c, 51; Am. Rep. 
633; The Montello, 20 WalL'tU. S.) 430; 
Spooner v. McConnell, " McLean (U. 

S.) 337. 3S0- 

2. Artificial Streams, — See cases cited 
in foregoing note. 

"A stream which can only be made 
floatable by artificial means, can in no 
sense be deemed a public highway." 
Martin, J., m Moore v. Sanborne, 2 
Mich. 519, 524; s. c, 59 Am. Dec. 209. 

Streams not naturally fitted for float- 
ing logs do not become public through 
improvement by the riparian owner. 
Wadsworth x<. Smith, 11 Me. 278; o. u., 
26 Am, Dec. c;25; I-Iolden v. Robinson 
Mfg. Co., 65 Me. 215. 

In Oregon, an artificial channel 
opened by an individual for his special 
use, and capable of floating logs and 
small boats for a few days in the year 
and at high water onl3',is not subject to 
the public easement. Nutter v. Galla- 
gher (Oregon iSgo), 24 Pac. Rep. 250. 
See also Haines v. Hall, 17 Oreg. T65. 

But the public may use for floatage a 
new channel into which the waters of a 
navigable stream have been diverted. 
Dwinel v. Barnard, 28 Me. 554; s, c, 48 
Am. Dec. 507; Dwinel v. Veazie, 44 
Me. 167. 

In England, an artificial channel 
through which the waters of a navigable 



river flow to the sea, is public. Regina 
t'. Betts, 44 Cox (C. C.) 211; 19 L, J., 
CLB. SOI. 

And the same is true of a new chan- 
nel created by a break in a dam. Whis- 
ler V. Wilkinson, 22 Wis. 572. 

And in South Carolina, the court de- 
clined to say "that an individual has 
such an exclusive right to a river which 
is capable of being made navigable, that 
the legislature may not declare it to be 
a public highway, whenever the ob- 
structions are removed and it becomes 
fit for public use." Cates v. Wadlington, 
I McCord (S. Car.) 583; s. c, 10 Am. 
Dec. 699. 

3. The following are laid down in 
Rhodes t'. Otis,. 33 Ala. 57S: Number 
of people interested in commerce car- 
ried on over the waters; importance of 
public interests involved; length of time 
floatable capacity continues; pr'evious 
use b^' public; treatment in government 
surveys. 

The existence of a current is not a 
test of the navigability of a river; it may 
be navigable with or without such cur- 
rent. Turner -u. Holland, 54 Mich. 300; 
6s Mich. 453. 

In Burroughs v. Whitwam, 59 Mich. 
279, the opinion of the majority of the 
court would seem to make actual use, 
and not capacity therefor, the test of 
navigability. 

In North Carolina, the test of navi- 
gability has been held to be capacity to 
afford passage for sea going vessels. 
Wilson V. Forbes, 2 Dev. (N. Car.) 30; 
Collins V. Benbury. 3 Ired. (N. Car.) 
277; ». c, 38 Am. Dec. 722; State v. 
Glenn, 7 Jones (N. Car.) 321. But this 
rule has been modified by recent deci- 
sions. Broadnax t'. Baker, 94 N. Car. 
67s; s. c, ss Am. Rep. 633; Hodges t". 
Williams, 95 N. Car. 331; s. u., 59 Am. 
Rep. 242. 

Under Tenn. Code, §§ 1439. i.';24' 
providing for the erection of mill dams 
across waters not navigable in the 



2U 



Definition. 



NAVIGABLE WATERS. 



At Common Law. 



{g) Proof of Navigability. — Navigable capacity is generally a 
question of fact,^'and the burden of proving it is on the party 
alleging the same.^ But the courts of some States will take judi- 
cial notice of the navigability of streams.^ 

2. At common law a distinction was made between waters navi- 
gable in law and those navigable in fact, the former phrase being 
used interchangeably with tide-waters."* This is the sense in which 
the term is still used in England,'^ and in many, especially the 
earlier, cases in this country.® Under this doctrine the title to 



proper, legal or ordinarj- sense, a stream 
is not navigable which is not of suf- 
ficient depth naturally for valuable float- 
age, such as rafts, flatboats and small 
vessels. Irwin v. Brown (Tenn. 1SS9J, 
12 S. W. Rep. 340. 

The Niagara River is a navigable 
river, notwithstanding the obstruction 
of the falls. Re State Reservation 
Comm., 37 Hun (N. Y.) 537. 

1. A Question of Fact. — State -\ Bell, 
Port. (Ala.) 365; Rhodes f. Otis, 33 
Ala. 578; Olive v. State, 86 Ala. 88; 
Treat f. Lord, 42 Me. 553; s. c, 66 Am. 
Dec. 298; Smith v. Fonda, 64 Miss. 
i;i;i; Felger f, Robinson, 3 Oreg. 45s; 
Healey v. Joliet etc. R. Co., 116 U. S. 
191. And may be proved b_v parol. 
Little Rock etc. R, Co. -o. Brooks, 39 
Ark. 403. 

But when facts are ascertained it be- 
comes a question of law. Morgan v. 
King, 18 Barb. (X. Y.) 277; Rhodes v. 
Otis, 33 Ala. 57S; Walker f. Allen, 72 
Ala. 4i;6-. 

2. Biirden of Proof. — Walker v. Al- 
len, 77 Ala. 456; Morrison v. Coleman, 
87 Ala. 655; Lewis v. Coffee Co., 77 
Ala. igo; s. c, 54 Am. Rep. 55; Sullivan 
V. Spotswood, 82 Ala. 163; Alabama S. 
R. Nav. Co. V. Georgia Pac. R. Co., 87 
Ala. [54. 

The tact that a stream between two 
lakes was not meandered by United 
States surveyors raises a presumption 
that it is not navigable. Clute v. 
Briggs, 22 Wis. 607. 

But a statute prohibiting obstruc- 
tions in streams meandered by United 
States suryeyors, does not dispense 
with proof of their navigability. Jones 
V. Pettibone, 2 Wis. 308. See also 
Ross V. Faust, 54 Ind. 471; s. c, 23 Am. 
Rep. 655. 

All tide waters axe frima faciemy'i- 
gable. See cases cited in foregoing 
note. 

3. Judicial Notice. — Bittle v. Stuart, 
34 Ark. 224; Xeaderhouser v. State, 28 
Ind. 257; Ross ti. Faust, 54 Ind. 471; 



s. c, 23 Am. Rep. 655; Woods v. 
Fowler, 26 Kan. 6S2; s. c, 40 Am. Rep. 
330; Hodgman t'. St. Paul etc. R. Co., 
23 Minn. 153, i6o; State v. Gilmanton, 
14 N. ?I. 467; Thompson ;■. Andros- 
coggin Co., ,4 X. H. 545; Metzger v. 
Post, 42 X. J. L. 77; s. c, 43 Am. Rep. 
341; Brown v. Scofield, S Barb. (X'. Y.) 
239; Lands v. \ Cargo of 227 Tons of 
Coal. 4 Fed. Rep. 47S. See also 
Walker v. Allen, 72 .\la. 456; Tewks- 
bury V. Schulenberg, .\ i Wis. 584. 

In Rngland it has been held that in 
stances of persons frequenting a stream 
for pleasure parties, etc., without con- 
sent of one claiming exclusive owner- 
ship, is sufficient proof that the streain 
is public. Miles v. Rose, i Marsh 313; 
5 Taunt. 705. 

4. 3 Kent's Commentaries (13th ed.) 
413. And see generally cases cited in 
foregoing note. This definition was first 
laid down Royal Fishery in the Banne, 
2 Davies (Eng.) 149. 

5. See cases cited below. 

In Rngland, as is well brought out in 
theopinionsquoted in the foregoing note, 
the physical conditions of the country 
rendered the common law definition 
approximately correct, and the same is 
largely true of Massachusetts, X'ew 
Jersey' and other States bordering on 
the ocean. 

6. Although the weight of authority, 
as seen in the foregoing note is to the con- 
tra ry, there are some well considered 
American cases in which the common 
law definition is adhered to. See Mid- 
dleton V. Pritchard, 4 111. 510; s. c, 38 
Am. Dec. 112; Chicago v. McGinn, 51 
111. 266, 272; s. c, 2 Am. Rep. 29^; 
Binney's Case, 2 Bland Ch (Md'.) 
124; Browne v. Kennedy, 5 Har. & J. 
(Md.) 196; Da3' V. Day, 22 Md. 530, 
537; Hatch V. Dwight, 17 Mass. 289; 
s. c, 9 Am. Dec. 145; Com. tJ. Charles- 
town, I Pick. (Mass.) 180; s. c, 11 Am. 
Dec. 161; Ingraham v. Wilkinson, 4 
Pick. (Mass.) 268, 271, 272; s. c, 16 
Am. Dec. 342; Com. v. Chapin, 5 Pick. 



245 



Classes. NAVIGABLE WATERS. Public. 

the soil beneath all tide-waters was, in England,^ iji the king, and 
in this country in the State.* 

(«) The Tidal Test Only a Prima Facie One. — But the ebb and 
flow of the tide was only a prima facie test of navigability even 
at common law, tidal waters, in many instances, being held non- 
navigable.^ 

(V) Departures from the Com,mon Law Definition. — There have 
been two notable departures in America froni the common law in 
this regard. First — An extension in meaning of the term navi- 
gable waters, so as to include all which are such in fact.* Second 
— In many States a change by which all nontidal waters fit for 
navigation came to be regarded as public property.^ 

3. By the civil law, waters navigable in fact are such in law ; a 
navigable river being defined as " statio itinere navigio" — a place 
or way for navigation.® The development of American law on 
this subject is toward the adoption of the civil law doctrines.' 

II, Classes.' — Navigable waters may be divided into two classes,* 
public and semi-public; the basis of classification being owner- 
ship. 

1. Public. — The waters of the first class and the soil beneath 
them are common property. The public not only have the right 
of navigation, but all other rights incident to ownership. Among 
these are fishing, gathering ice, sea-weed, sand and gravel,^ etc. 
(See Fish and Fisheries, 8 Am. & Eng. Encyc. of Law 852; 
Ice and Ice Companies, 9 Am. & Eng. Encyc. of Law 852 ; 
To this class belong {a) tide-waters, including the sea and its arms 
and tidal-rivers ; {p) in many of the States all fresh water rivers 
and lakes which afford capacity for valuable floatage. (See LAKES 
AND Ponds, 12 Am. & Eng. Encyc. of Law 610.) 

(Mass.) igg; Waterman t;. Johnson, 13 the true criterion is the situation and 

Pick. (Mass.) 261; Bardwell v. Ames, nature of the channel. See also Wool- 

23 Pick. (Mass.) 333; Knight -z;. Wilder, rych on Waters, pp. 40-41. 

2 Cush. (Mass.) 199; s. i;., 48 Am. Dec. Tidal channels are navigable in law 

660; Hopkins Academy v. Dickinson, only when so in fact. State v. Pacific 

9 Cush. (Mass.) 544; Attorney General Guano Co., 22 S. Car. 50, 77. 

■V. Woods, 108 Mass. 436; s. c, 11 Am. 4. Sec note supra. 

Rep. 380; Com. v. Vincent, 108 Mass. 5. See supra. 

441; Morgan v. Reading, 3 Smed. & M. 6. Institutes Just., lib. 2, tit. i; Di- 

(Miss.) 368; The Steamboat Magnolia gest, lib. 43, tits. 12, 13, 14; Domat 

-'. Marshall, 39 Mich, no; Scott, v. Civil Law, Preliminar3', bk. i, tit. 3^1, 

Wilson, 3 N. H. 321, 325; Cobb v. arts. 1,2; Code Napoleon, bk. 2, tit. 2, 

Davenport, 32 N.J. L. 379; Attorney ch. 2, arts. 556, 560-63; tit. i, ch. 3, 

General v. Delaware etc. R. Co., 27 N. art. 538. 

J. Eq. 631; Arnold v. Mundy, 6 N. J. 7. See especially the later case cited 

L. i;s.c., 10 Am. Dec. 356; Benner v. in note supra. 

Platter, 6 Ohio 505, 510, note. 8. For other classifications, see An- 

1. See cases cited j«^ra. gell on Watercourses (7th ed.) i; Stu- 

2. See cases cited supra. art v. Clark, .: Swan (Tenn.) 9; s. c, 58 

3. Mayor of Lynn v. Turner, Am. Dec. 49; Ross v. Faust, 54 Ind. 
Ccwper 86; Miles v. Rose, 6 Taunt. 471; s. c, 23 Am. Rep. 655; Georgia 
(Eng.) 705; I Marsh. 313; McManus v. Code 2229; Holbert v. Edens, 5 Lea 
Carmichael, 3 Iowa i, 27. (Tenn.) 204, 207; s. c, 40 Am. Rep. 26. 

In Rex •T'. Montague, 6 D. & R. 616 9. See supra; Sollidav "'• Johnson, 
(Eng.) 4 B. & C. 398, it is held that 38 Pa. St. 380. 

246 



Classes. 



NAVIGABLE WATERS. 



Public. 



(a) Tidal — \\) National Dominion Over — (See also ADMIRALTY, 
I Am. & Eng. Encyc. of Law 193; International Law, ii 
Am. & Eng. Encyc. of Law 431). — The open sea is the com- 
mon property of all nations and cannot be exclusively appropri- 
ated.^ But a nation has dominion over seas adjacent to its coast 
for a distance equal to the range of cannon, or about three miles.** 



1. I Wharton's Int. Law Digest, (j 
26, I Kent Com. 26*; Grotius De Jure 
Belli, bk. 2, ch. 2, % 3; Vattel, Droit 
des Gens (Chitt3''s ed.), § 280. 

2. The Marine League. — i Wharton's 
Int. Law Digest, § 32; Bynckershock 
De Dominio Maris, ch. 2, p. 257; 
Vattel, Droit des Gens, \ 287, ei seq.; 
Wheaton's Int. Law (Lawrence), pt. 2, 
ch. 4, §§ 8, 10; I Phillimore's Int. Law 
(2nd ed.), ch. 4; HeiFter Pub. Int. Law, 
\ 75; Bluntschle, Das Moderne Volk- 
recht, §§ 307-9; The Leda Swa. Adm. 
(Eng.) 40; The Maria, i C. Rob. 
(Eng.) 340, 353; The Twee Gebroeders, 
3 C. Rob. (Eng.) 162, 164; Regina v. 
49 Casks of Brandt', 3 Hagg. Adm. 
(Eng.) 257, 289; The Saxonia, 15 Moore 
(P. C.) 262; Gammel v. Commrs. of 
Woods, 3 Macq., H. L. • 419, 465; 
Gann v. Whitstable Free Fishers, 11 
H. L. Cas. 192; 13 C. B., N. S. 8.;3; 11 
C. B., N. S. 387; Church v. Hubbart, 2 
Cranch (U. S ) 187, 234; The Ann, i 
Gall. (U. S.) 62; United States v. 
Smiley, 6 Sawy. (U. S.) 640; Chase v. 
American Steamboat Co., 9 R. I. 419; 
St., II Am. Rep. 274. The range of 
cannon is taken as tlie measure of dis- 
tance, on the principle that the domin- 
ion of a State extends only so far as it 
may be maintained hy force from the 
coast. I Wharton's Int. Law, § 32. p. 
102; Lawrence's Wheaton's Int. Law 
846. Hence it seems that this distance 
raav be extended with the increased 
range of canon. Hall Int. Law 127: 
Field Int. Code (2nd ed.), § 28; : Fiore 
Int. Law, § 373; Bluntschle, 303. See 
also an article by Francis Wharton, 
"The Marine Zone," 3^ Albany Law 
Journal 104. 

Qualiflcations of the Doctrine. — In 
United States v, Kessler, Baldw. (U. 
S.) 22, it was said that the principle 
on which nations claimed this exten- 
sion was, "to protect their safety, peace 
and honor from invasion, disturbance 
and insult," and it was held that the 
court did not acquire jurisdiction over a 
crime committed on a foreign vessel, 
because the latter was within three 
miles of the shore. 

In England, previous dicta and de- 



cisions upholding the aoctrine of ma- 
rine extension were overruled in 
'Queen v. Keyn, L. R., 2 Exch. Div. 63 
(1876). In that case defendant was 
commander of a German vessel which 
negligently collided with and sunk a 
British ship, causing the death, by 
drowning, of one of its passengers. 
The aifair took place within three 
miles of the coast of England, and by 
the law of that country the facts were 
such as to constitute manslaughter. 

But it was held by a majority of the 
thirteen judges that low water mark on 
the coast was the limit of the territory 
of England, and that its courts had no 
jurisdiction over the person of defend- 
ant. Among the reasons advanced for 
this holding were: that the doctrine of 
the marine league vs;as merel)- a shrink- 
age of the extravagant claims of early 
writers on international law (See Gould 
on Waters, §§ 3, 7; Henry, Adm. Jur., 
§ 89.), and that these claims being no 
longer maintained as to the whole, 
could not apply to a limited portion; 
that it could not be shown that the law 
relative to the ancient jurisdiction of the 
admiral had ever been supplanted by 
the doctrines of the publicists; and that 
neither the assertions pf the latter nor 
the assent of other nations were suffici- 
ent, without an express act of parlia- 
ment, to extend the territory of Eng- 
land. This decision was binding on the 
English courts. Harris v. The Fran- 
conia, L. R., 2 C. P. Div. 173; Direct U. 
S. Cable Co. v. Telegraph Co., L. R., 2 
App. Cas. 394. But, according to Sir 
Henry Maine, it rests on an entirely 
different conception than that which 
prevails in America, as to the obligatory 
force of international law on individual 
States. Maine's Int. Law 39, et seq. 

Statutory Extension. — The effect of 
the decision in Queen v. Keyn was nulli- 
fied by the Territorial Waters act, 
passed in 1878, extending the jurisdiction 
of the admiralty to the three-mile limit. 

In the United States the three-mile 
belt received statutory recognition in the 
act Congress of 1794 (i Stat, at Large, 
p. 384, ch. 50, (j 6), providing for the 
jurisdiction of district courts over cap- 



247 



Classes. 



NAVIGABLE WATERS. 



Public. 



Where the coast is indented, this distance is measured from a 
straight Hne drawn between the enclosing headlands.^ 

(2) Ownership. — The title to all tide-waters and their beds is, 
in this country, vested in the several States for the use and benefit 
of the public* In England it is prima facie in the crown. ^ 

{a) Right to Bathe in the Sea. — But while the public are, in 
general, entitled to the common enjoyment of such waters and 
their products,* it has been held that there is no common law 
right to bathe in the sea.^ 



tures within the marine league. By the Cal. 3S5; Pitkin v. Olmstead, i Root 

treaty between the United States and (Conn.) 217; Chapman v. Kimball, 9 

Mexico (9 Stat, at Large, 926, art. 5) Conn. 40; s. c, 21 Am. Dec. 707; Simons 

it was stipulated that the boundary line v. French, 25 Conn. 346; Moulton v. 

should commence in the gulf, three Libbey, 37 Me. 472; s. c, 59 Am. Dec. 

leagues from land opposite the mouth 57; Browne v. Kennedy, 5 Har. & J. 



of the Rio Grande, and run northward 
with the middle of the river. The ter- 
ritorial limits of Alabama are extended 
by the constitution (art. 2, § i) to .six 



(Md.) 195; Lakeman v. Burnham, 7 
Gray (Mass.) 437, 440; Boston i'. Rich- 
ardson, 105 Mass. 351; Arnold v. 
Mundy, 6 N. J, L. i; s. c, 10 Am. Dec. 



leagues from the gulf shore. Califor- 3^6; Gough t'. Bell, 21 N.J. L. 156; 22 
nia's limits reach three English miles N. J. L. 441; Bell v. Gough, 23 N. J. L. 
into the Pacific (Const, art. 12). Those 624; Stevens t). Paterson R. Co., 34 N. 
of Massachusetts extend one marine J. L. 532; s. c, 3 Am. Rep. 269; Fault), 
league from low-water mark (Gen. Hazleton, 37 N.J. L. 106; Attorney Gen- 
Stat. 1882, eh. I,' § i; of Rhode Is- ■ eral v. Stevens, i N. J. Eq. 369; s. i_., 
land one league from high water mark 22 Am. Dec. 526; Attorney General v. 
(Pub. Stat., 18S2, ch. I, 5 I). The Hudson Tunnel R. Co., 27 N.J. Eq. 176; 
limits of the Republic of Texas extended Hudson Tunnel Co. v. Attorney Gen- 
three leagues into the gulf, and this eral, 27 N. J. L. 573; Roger v. Jones, i 
boundary.was retained by the State after Wend. (N. Y.) 261; Smith v. Levinus.S- 



annexation. (Hartley's Digest, ^§ 1631, 

i634). V 

1. I Wharton s Int. Law Dig., § 28; 
Phillimore's Int. Law (2nd ed.), pt. 3, 
ch. 8; Lawrence's Wheaton's Int. Law, 



N. Y. 472; Peoples. Tibbetts, 19 N.Y. 
523; Hudson River R. Co. v. Loeb, 7 
Robt. (N.Y.) 418; People v. New York 
etc. Ferry Co., 68 N. Y. 71; Towle v. 
Rerason, 70 N. Y. 303, 30S; Provi- 



pt. 2, ch. 4, § 6; Marten's Precis du dence Steam Engine Co. v. Providence 

Droit, § 40; Kliiber, Droit des Gens, etc. Steamship Co., 12 R. I. 348; s. c, 34 

§ 130; Com. -'. Peters, 12 Mete. (Mass.) Am. Rep. 652. 

387; Mahler v. Transportation Co., 3. 8 Bacon's Abridgment, title Pre- 

35 N'. Y. 352; People v. Supervisors, rogative, bk. 3; 5 Comyns Digest, Navi- 

73 N. Y. 393, 396; United States v. gation, A. B; Royal Fishery of the 

Robinson, 4 Mason (U. S.) 307; Banna, Davies (Eng.) 49; Fitzwalter's 



De Lovis v. Boit, 2 Gall.' 39S, 425; 
United States v. Crush, 5 Mason (U. S.) 
290; United States v. New Bedford 
Bridge, i Woodb. & M. (U. S,)40i; 
Direct U. S. Cable Co. f. Anglo- 
American Telegraph Co., L. R., 2 App. 
Cas. 394; Queen -'. Cunningham, Bell 
(C. C. ) 86. 

2. Martin v. Waddell, 16 Pet. (U.S.) 
367; Pollard V. Hagan, 3 How. (U. S.) 



Case, I Mod. Rep. (Eng.) 105; Carter 
V. Burcot, 4 Bur. (Eng.) 2162; King 
V. Smith, 2 Doug. (Eng.) 441; Will- 
iams V. Wilcox, 8 Ad. & E. (Eng.) 314; 
Attorney General f. Chambers, 4 De 
G. M. & G. (Eng.) 206; Whitstable 
Free Fishers v. Gann, 11 H. L. Cas. 192; 
n C. B., N. S. 387; 18 C. B., N. S. 853; 
19 C. B., N. S. S03; Penryhn v. Holme, 
\j. R., 2 Exch. Div. 328; Mayor of Car- 



212; Howard v. Ingersoll, 13 How. (U. lisle v. Graham, L. R., 4 Exch. 361,368; 

S.) 381, 421; Bennett f. Boggs, i Baldw. Murphy w. Ryan, Ir. R., 2 C. L. 143. 

(U. S.) 76; Smith?'. Maryland, 18H0W. 4. See supra. 

(U. S.) 74; Mumford v. Wardwell, 6 5. Eight to Batbe In the Sea. — Blun- 

Wall. (U. S.) 423,436; Barney v. Keo- dell v. Catterall, 5 B. & Aid. 268. 

kuk, 94 U. S. 324; McCreadytJ. Virginia, And under a statute regulating sea 

94 U. S. 391, 394; Coburn z'. Ames, 52 bathing and licensing bathing machines 

248 



Classes. 



NAVIGABLE WATERS. 



Public. 



{b) Nontidal—{i) Rivers — (See also Lakes AI\D Ponds, t2 
Am. & Eng. Encyc. of Law 6io). — A river is a body of water 
with a uniform current.^ It consists of the alvcus or bed, the 
water, and the banks or shores (ripac or litora), according as the 
stream is nontidal or tidal.^ (See also Waters and WATER- 
COURSES.) In many of the States, inland rivers navigable in the 



on the seashore, a licensee is not war- 
ranted in placing the latter in a portion 
of the beach which is private property. 
Mace V. Philcox, 15 C. B., N. S. 600; 
lojur., N. S. 6S0; 33 L. J., C. P. 124. 

Qualifications of This Doctrine. — "If 
the decision in Blundell v. Catterall, 5 
B. & Aid. 268, relates only to such parts 
of the shore as are private property, the 
only practical restraint upon the privi- 
lege of sea batliing seems to be tliat 
which is imposed by decency and re- 
spect for the public morals." Gould on 
Waters, § 26, citing Rex f. Gunder, 2 
Camp. 89. 

In McManus v. Carmichael, 3 Iowa 
I, Woodward, J., says of Blundell v. 
Catterall: "It is a strange case and much 
more, it is conceived, has been made of 
it than it warrants. All that was de- 
cided upon the question of the common 
law right was clearly extra-judicial, 
and it sets up a doctrine which probably 
would not be listened to in this country; 
that is, that there is no common law 
right to bathe in the sea. The case is 
doubted and dissented from in many 
others, and an English writer. Hall, in 
his treatise on the Rights of the C{ovvn,. 
etc., finds fault with it." 

LowKiE, C. J.: "It has never been 
considered as a trespass against the 
State ... to bathe in the public 
waters." SoUiday v. Johnson, 38 Pa. 
St. 3S0, 381. 

Pearsox, J.: "We all, by nature, 
have a right to see by the light of the 
sun, and to breathe the air of heaven, 
to bathe in the sea^ and to catch fish; 
But there is no necessit}', and nothing 
from which to imply a right to go over 
another's land for these purposes." 
Hetfield v. Baum, 13 Ired. (N. Car.) 
394. 399: s. c, 57 Am. Dec. 563. 

1. Definition. — State w.Gilmanton, 14 
N. H. 467. See also Joliet etc. R. Co. 
V. Healy, 94 111. 416. In the former 
case it is said that this definition must 
be construed with reference to the par- 
ticular body of wafer to which it re- 
lates. 

"A river has been defined to be a 
running stream, pent in on either side 
by walls and banks, and it bears that 



249 



name as well where tiie waters flow and 
reflow as where they have their current 
one way." Woolrych on Waters, p. 40, 
citing Callis on Sewers, p. 77. 

Tenterden, C. J., in construing the 
phrase jiuvien vel cursas aqa(S^ says: 
"Now if these words be considered to 
denote "water Jlowing in a channel be- 
tiveen banks more or less defined^ al- 
though such channel maj' be occasion- 
ally dry, a rule will be established of 
general and easy application." Rex u. 
Oxfordshire, i B. & Ad. (Eng.) 301. 

But "to confine those words to a con- 
stant stream, or course-of water flowing 
at all times, to the exclusion of flood 
water, whether rarely or frequently oc- 
curring, is not altogether consistent 
with the doctrine laid down in Rex v. 
Traflibrd (i B. & Ad. 874). In that 
case the court, in speaking of the an- 
cient course and outlet of flood water, 
which had been obstructed by fenders 
or banks, said: 'Now it has been long 
established that the ordinary course of 
water cannot be lawfully changed or 
obstructed for the beneflt of one class 
of persons to the injury of another. 
Unless, therefore, a sound distinction 
can be made between the ordinary 
course of water flowing in a bounded 
channel at all usual seasons, and the ex- 
traordinary course which its super- 
abundant quantity has been accustomed 
to take at particular seasons, the cre- 
ation and continuanc